BoI, NAICOM Explore Means to Derisk Lending to SMEs


James Emejo in Abuja

The acting Managing Director, Bank of Industry (BoI), Mr. Waheed Olagunju monday hinted that the bank is currently working with the National Insurance Commission (NAICOM) to provide a framework to boost credit to small and medium enterprises (SMEs) by having insurance firms provide cover for loans granted to the former.

He said about 10 insurance companies had already been shortlisted and agreed to collaborate on the new initiative.

Speaking to journalists in Abuja on the sidelines of the 2016 National insurance Conference, organised by the Insurance Industry Consultative Council (IICC), Olagunju said although the bank had always craved to expand lending operations to small enterprises, they are often able to meet loan conditions.

He said: “So what we are trying to do now is to see how insurance companies can insure and protect the loans that we grant to SMEs such that those SMEs should pay premiums to insurance companies and that would secure the loans that we are granting to them.

“That’s what we are doing with NAICOM and in doing so, we are mindful of the health of several insurance companies; we would be working with NAICOM to ensure that we are dealing with insurance companies that can share risks with us effectively and efficiently so that when there are claims, they’ll be able to honour their obligations with the BOI.”

He said the collaboration would further expand to cover assets which the bank finance so as to have them insured against fire, theft, and natural disasters.

He said:”So the more viable enterprises that we are able to promote and support, the more the customers the insurance companies would also have-so it will be a win-win situation because if the customer is doing well and is able to honour his or her obligation to the BOI, then that same person will also be able to honour his obligation to the insurance company.”

Also speaking on the proposed collaboration between both institutions, Commissioner for Insurance/Chief Executive, National Insurance Commission (NAICOM), Mr. Mohammed Kari said prudential guidelines will be issued to insurance operators on the new arrangement as soon as all terms are understood.

He said: “We feel we can support the effort of the BOI by ensuring that every facility they loan out is properly protected by the collaterals we can give and ensuring that the loan assets are properly covered.

“We, in the long run are hoping that the industry will be able to contribute to the funds that they would be using to loan out and as soon as we can get an excellent understanding of what they do, the security of the loans they provide and the likely returns, we would be able to convince our industry by issuing appropriate prudential guidelines to enable insurance companies invest in their efforts.”