By Daily Post Staff Globally, banks are renowned to be engines of economic growth. They mobilize funds from areas of surplus to area...
By Daily Post Staff
Globally, banks are renowned to be engines of economic
growth. They mobilize funds from areas of surplus to areas of needs as well as
give interest to the depositors and charge interest from the borrowers, thereby
providing income for those who have idle funds, and earning income from those
that borrow money to finance their businesses.
By so doing, capital gaps that may exist for companies
undertaking important transitions in their activities are eliminated.
The long-standing need to strengthen capital structures and
to decrease dependence on borrowing has become more urgent, as many firms are
obliged to increase leverage in order to survive the recent economic and
financial crisis. Indeed, the problem of SME over-leveraging may have been
exacerbated by policy responses to the crisis, which tended to focus on
mechanisms that enabled firms to increase their debt (e.g. direct lending, loan
guarantees).
While bank financing will continue to be crucial for the SME
sector, there is a broad concern that credit constraints will simply become
“the new normal” for SMEs and entrepreneurs. It is therefore necessary to
broaden the range of financing instruments available to SMEs and entrepreneurs,
in order to enable them to continue to play their role in investment, growth,
innovation and employment.
Without a doubt the full potential for ensuring the
expansion of entrepreneurs can be viewed from the performance of SMEs.
Small and Medium Enterprises (SMEs) are seen as critical
segments of thriving economies. Nigeria was no exception as the economy slipped
into recession for the second time in four years as oil prices plunged in the
midst of the COVID-19 pandemic. While bank financing will continue to be
crucial for the SME sector, there is a broad concern that credit constraints
will simply become “the new normal” for SMEs and entrepreneurs.
To guard against this occurrence, experts called on
financial institutions to expand the range of financing instruments available
to SMEs and entrepreneurs. This, they said, would enable them to continue to
play their role in investment, growth, innovation and employment.
During the turbulent economic situation where businesses
suffered under the weight of COVID, insecurity and other economic challenges, a
few banks were upstanding and served as adequate life-line to businesses
helping the economy surmount its economic challenges.
Access to credit has, therefore, become very important,
especially in a time of crisis, exacerbated by the COVID-19 pandemic, with
economies all over the world badly hit.
One of the banks worthy of mention is United Bank for
Africa. The bank was innovative enough to help businesses in Nigeria and across
Africa weather the storm with several loan facilities that helped change the
narrative and eventually catalyse growth.
The best performers in terms of lending to businesses in the
first quarter of the year include United Bank for Africa (UBA) Plc, Access Bank
Plc, FBN Holdings Plc, FCMB Holdings Plc, Fidelity Bank Plc, Stanbic IBTC
Holdings Plc, and Wema Bank Plc. It is worthy of note that UBA did well to pull
its weight firmly behind business in 20 African countries which helped in a
great way to keep them afloat at a turbulent time occasioned by COVID 19 and
inflation from the Ukraine / Russia war.
Commenting on the credit to customers by banks, a financial
expert and securities dealer, Mr. David Adonri of Highcap Securities Limited,
said short-term credit was required by businesses to finance their working
capital.
“Banks are the source of this type of finance. As a result
of risk management considerations, bankability of requests is a major factor in
credit creation. Of course, banks will usually observe the canons of lending
when granting credits. If the economic environment is conducive and prospects are
bright, the confidence to grant credit to borrowers will be high because
repayment is guaranteed,” he said.
According to Adonri, the volume of credit granted in Q1,
2021 by banks rose because of an increase in economic activities.
“Fund users demanded more credit during the period to ramp
up their products and services to cover increased consumer pull. The demand on
banks for credit also resulted in increased borrowing by banks from the Central
Bank of Nigeria (CBN) during the period.
“The supply gap in the economy is still huge and this will
increase demand for bank credit. As a result, banks like UBA are poised to
create more credit this year to meet the rising Gross Domestic Product (GDP)
growth rate revised from 1.5 per cent to 2.7 per cent,” he added.
Speaking on the bank’s recent loan position and consequent
determination to buy the nation’s SME sector, Group Managing Director, Oliver
Alawuba, said “Our passion for Small Businesses and great ideas has never been
in doubt and is evident in the firm support given to individuals and business
as our loan products are tailored specifically to meeting the varying needs of
all our customers.
Continuing, Alawuba said, “Despite the tumultuous impact of
Covid-19 pandemic globally and across our 23 countries of operation, we created
N519.0 billion additional loans as we continued to support our customers and
their businesses. Customer deposits grew 48.1% to N5.7 trillion, driven
primarily by additional N1.8 trillion in retail deposits.
“As a global bank, we remain well capitalized and determined
to successfully drive financial inclusion on the continent through our
innovative products and vast network. Our capital adequacy and liquidity ratios
came in at 22.4% and 44.3%, well above the respective regulatory minimum of
15.0% and 30.0%.
Speaking on the bank’s strategy, he said, “Our primary
strategy will continue to focus on providing excellent services from our
customers’ standpoint, putting the customer first always. Looking ahead, I am
inspired by the achievements we have made since the launch of our
transformation programme. \
“We have expanded market share considerably across the
geographies where we operate and are consolidating our digital banking
leadership in Africa. We will continue to leverage our diversified business
model and dedicated workforce to further strengthen our position as ‘Africa’s
Global Bank’.”
Also on the performance, the Group Chief Financial Official,
Ugo Nwaghodoh said, “The persistent low interest rate environment in 2020
exerted significant downward pressure on margins. Notwithstanding, our interest
income for the year grew by 5.7% (to N427.9 billion), driven by 8.2% and 7.5%
year-on-year growth on interest income on loans and investment securities
respectively.
“Our interest expense declined by 8% (to N168.4billion)
driven largely by a 34.2% decline in interest expense on customer deposits in
our Nigerian operations, bringing down the Group’s cost of funds to 2.9%, from
4% in 2019.”
While giving an insight to the bank’s array of loan products
changing the dynamics in the industry, Group Head Consumer Lending, Anant Rao
recently spoke about some of the products and intrinsic benefits to customers
as he said Senior Citizens Loan is designed to support Pensioners within the
ages of 55- 70 years. they can get up to N10 million to start a retirement
project, travel the world and do much more and repay conveniently within 36
months
Anant further explained that no collateral was required to
access the loans. There is also the UBA Personal Loans, Auto Loans, Asset
Finance, Mortgage.
As for Personal Loans, Anant said: “It is a product designed
to aid the finance of the daily needs of our customers. Available to employees
whose salaries and other emoluments are being paid through UBA or who are
willing to transfer their accounts to UBA.
“Here, required documents include letter of introduction and
awareness from employer, copy of customer’s staff ID, copy of customer’s Valid
ID, duly accepted offer letter and duly filled loan application form.’’
He explained that Asset Finance, one of its products, was
designed to facilitate the purchase of physical assets ranging from household
appliances to alternative power solutions and devices by our retail customers
through approved partnering vendors, giving them the convenience to pay over a
period.
The bank listed the required documents as letter of
introduction and awareness from employer, copy of customer’s staff ID, copy of
a customer’s valid ID, proforma invoice in UBA/customer’s name and duly filled
loan application form as well as accepted offer letter.
UBA Mortgage Loan is a product designed to part-finance the
acquisition of residential real estate by salary earners whose employers are
listed on the bank’s approved counterparty list.
“The product is targeted at High-Net-Worth Individuals
(HNIs) with predictable and sustainable income. The product is to enable
customers to buy fully developed properties or draw equity from their home as
loans for specific purposes,” the bank said.
The UBA Personal Loan – Direct is a variant of UBA Personal
Loan product targeted at civil servants whose salaries are not domiciled with
UBA. The product is designed to offer personal loans to civil servants who have
difficulties in changing their salary accounts from other banks to UBA.
This loan is available to Federal civil servants that are
enrolled on IPPIS platform, state civil servants (this will be limited to
states whose salaries are managed by ICT firms). The required documents include
duly filled loan application form, a copy of customer’s staff ID, a copy of
customer’s valid ID and customer’s instruction letter.
UBA FX Cash Backed Loan is a term loan designed for
Nigerians who are resident in Nigeria or Abroad and have a funded domiciliary
account with the bank. Customers can get up to 10 million naira for investment
purposes or to meet the financial needs of relatives in Nigeria. The required
documents include; Funded domiciliary account, Duly completed loan application
form, valid means of Identification (international passport, national driver’s
license, national id card and voter’s card
Also, the UBA Working Capital loan offers up to N50million
to help business owners meet their cash flow needs and expand their business. A
flexible collateral cover will be required depending on the loan amount and the
nature of the customer’s business.
This loan product is targeted at customers with verifiable
credit net worth whose cash flow patterns meet the requirement for lending and
other structured groups/business clusters. There is also the UBA Asset Finance
for SMEs, the UBA School Loans and the UBA Health Loan.
“It is a medium-to-long term facility aimed at meeting
working capital, asset and mortgage needs of registered privately-owned
schools. The bouquet comprises a four-month time loan, a three-year asset
finance loan and a 10-year mortgage loan.
Other variety of loan offerings tailored specifically to
meet the needs of different individuals also include Auto Loans where customers
can get up to N15 million for part-financing of brand new vehicles for
customers whose salaries are domiciled with the Bank. Vehicles purchased will
be in the name of UBA/Customer’s name and they are available for all car models
at selected dealer shops nationwide.
The Required Documents are as follows; Letter of
introduction and awareness from employer, copy of customer’s staff ID, copy of
customer’s valid ID, Proforma invoice in UBA/customer’s name, duly filled loan
application form and accepted offer letter.
With a UBA Credit Card, customers are free to spend up to
N3million and have the option to pay as low as 0% interest when they repay
within 45 days. UBA customers can withdraw cash both locally and
internationally, make online bill payments, shopping, hotel reservations and
enjoy amazing discounts at partner restaurants & hotels, lounge access, etc
across the world.
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