Have you been to a slaughterhouse? Let me open the door to the house. Inside a slaughterhouse, there are always two parts. There is a clean side. There is a dirty flank. Domestic animals go through the dirty side first. Then they would go into where they’re going to be prepared for human consumption. The dirty side is where all the guts, hair and skin are removed. It’s a proper production line. If you have visited the slaughter slab you would understand. A slaughterhouse is a bloody place.
However, there is another kind of slaughterhouse. It is a finance house. It is a place where you can access the personal loan. But because the management of the company had received a bloody nose many times from unscrupulous Nigerians, the finance house has turned into a slaughterhouse. The company had raised the stake. It has made it near impossible for borrowers to fleece the company again. The interest rate it charges borrowers on secured and unsecured personal loan range from five per cent to 36 per cent. The Nigerian banks and some online micro-lender charge lower rates. The lack of access to a bank loan has lured many business owners into a slaughterhouse like this one.
This is so because a lack of adequate funding has remained the main challenge confronting small and medium enterprises in Nigeria. As such, some loan sharks, like this slaughterhouse, are taking advantage of the loophole. For instance, to qualify for credit in any of the loan companies I visited recently, you need to supply your identity card, one passport photograph, post-dated cheques from your guarantor, a bank statement showing six months transaction and a valid utility bill. You also need processing fee, a guarantor’s confirmation letter, and an application letter, which must be signed and sealed by your guarantor. In addition to this, you need an offer letter and collateral.
The lack of access to a bank loan has lured many business owners into a slaughterhouse like this one.
Calm down. You have not qualified for a loan yet. Your collateral must be a car that is not less than 10 years old. You would park the car on the premises of the credit company. You would hand over all valid documents relating to the vehicle. There are many rivers to cross before you can secure the loan. Having listened to the litany of credentials needed before an applicant can touch the cash I wondered why an applicant need all of the above information before getting a loan facility. The managing director told me the company had been duped in the past. Such an experience was a rude awakening for the management. Hence, the rigorous qualifying steps.
The manager explained that one of the applicants in the past had pre-sold the car before presenting the same car as collateral. The substantive buyer sued the company. The court ruled in his favour. The buyer won. The finance house lost. In another instance, one applicant fled the country after accessing the credit facility. The manager narrated that effort to recover the loan failed. Another applicant, he recalled, cash the credit and relocated to his village. He swapped his SIM pack. He changed his name. He destroyed evidence linking him with the finance house. The finance house lost its investment.
He shared other sad experiences. This credit company is thriving because the banks, microfinance banks and some online lenders are not playing their professional roles adequately. If these financial institutions are performing at the optimal level this slaughterhouse would not thrive. For instance, I visited another popular credit company that promises to give as much as N5 million to business owners. Having fulfilled all the paper works, my application was rejected because the bank statement, which met all the conditions, does not have “monthly inflow.”
It is quite obvious that the credit companies are searching for mom and pop shop-owners and salary earners. The finance house needs people who have a steady monthly income flow. The operators of this popular loan company have forgotten that every business at some point in its operating cycle requires some form of finance to pay its short term indebtedness, to fund new projects, to execute business plans and to acquire operating assets. Likewise, individuals at some point may need bank loans to help fund car purchase, real estate mortgage, pay school fees or buy home appliances.
The management of these credit companies and the banks should know that not all businesses generate monthly inflow. Some small and medium enterprises have a 45-day financial inflow. Other businesses in the service arena must endure 90-day hardship before they are paid. This fact means these business owners would not fit into the plans of the banks. They would not be attractive to the loan companies. That is why the management of these small and medium enterprises keep running to the slaughterhouse. And they are treated like animals.
If any credit company requests collateral beyond your capacity, please dialogue with your feet. Besides, do not transact business with a butcher in the slaughterhouse.
Well, on the other hand, online micro-lenders such as Branch, Kudi, Zedvance, Social Lenders, and Palm Credit etc are on the increase. These micro-lenders are employing machine learning to analyse the ability of the applicants to repay. Many business owners are getting loans, too. The Central Bank of Nigeria’s Credit Condition Survey Report showed that there was an increase in the availability of secured credit to households and corporates in the first quarter of 2018. That is before the outbreak of the coronavirus pandemic. But why do other individuals and business owners keep on patronising the slaughterhouses?
According to one of the operators of the slaughterhouses, when many of the borrowers cannot fulfil the requirements of the loan agreement and repay the principal, they can renegotiate the loan facility. This has worked very well. Aside, they would still pay the interest and all charges on the loan. Some of the business owners have found this easier than taking a bank loan. Hmm, another option, he explained, is to get an unsecured loan and pay the higher rate. This flexible and smooth transaction has made it attractive to many Nigerians. But that is the tradition of the slaughterhouse. It will lure you in and prepare you for the kill.
As I witnessed activities inside the loan house, some applicants who failed to repay their loan have forfeited their cars. The fleet of cars in the compound is clear evidence. The finance house has had to threaten and harass other applicants with mercenary soldiers. They were frightened and had to seek another source to repay the loan. Some applicants had to repay the loan with their sweat or blood. Other applicants were not so lucky. They were beaten blue and black. They shed their blood.
Here is an indicator. If any credit company requests collateral beyond your capacity, please dialogue with your feet. Besides, do not transact business with a butcher in the slaughterhouse. In a slaughterhouse, blood always flows. Anyway, do you have a similar experience? Please share it with me so that others would not go into the slaughterhouse in the name of seeking loan facility.
*Olaegbe can be reached through psalmsonolaegbe@gmail.com, @RarzackO, Skype:rarzackolaegbe
