Why banks avoid funding start-up businesses
Why banks avoid funding start-up businesses – Commercial banks are avoiding funding start-up businesses given the high risk associated with such transactions, Head Trade Finance and Enterprise Banking at Stanbic IBTC Bank, Babatunde Akindele, has said.
Speaking during Stanbic IBTC Bank SME Capacity Building Series held in Lagos, he explained that private or angel investors should fund such enterprises and grow them to full capacity instead of relying on commercial banks.
He said: “The Angel Investors are designed to fund start-ups. Banks were not designed to fund start-ups. The best we can do is impart business skills on them to enable them grow and add value to the economy. Stanbic IBTC wants to create employment, stimulate the economy and increase the impact of SMEs on the economy,” he said.
Akindele said the essence of the capacity building is to impact skills on SMEs and enhance their capabilities. “SMEs remain the lifeblood of any economy. The better our SMEs, the more growth we will see. The idea is to impart skills on owners of SMEs businesses. We are training SMEs operators that are both new, or have been in the business for long,” he said.
On why it is still difficult for many SMEs to access credit, he said the operators must comply with set lending criteria.
“All lending come with criteria. We are here to let them understand the principles of business and letting them to meet those principles. We are happy that Nigeria’s Ease of Doing Business Report released by the World Bank showed an improvement. That alone will help boost foreign direct investment to the economy, which the SMEs will benefit from,” he said.
“SMEs are the livewire of any economy. So the idea is that the better our SMEs become, the better their impact on the economy and the more growth we will experience.
“It is a priority and that is why we are training people who are new in the business and those who have been in the business for a while. We have different roles in the economy but impacting business skills on small and medium businesses is something we can do and it’s something we are doing right here today,” he said.
Akindele added that the Central Bank of Nigeria (CBN) recognises that there was the need to find ways to work on interest rates for SMEs, which have given rise to a number of intervention funds like the SMEs Fund.