About 80% youths of nowadays plans to go into entrepreneurial activities and become a successful entrepreneurs but one thing has been a major draw back on them. Though people do say the idea of the business is first while all other things follows. But, on the issues am to discuss is the area of Source of Finance.
Capital have an important role to play in the area of business because, with 80% of initiatives and 20% of capital is not enough to finance an investment. Capital has served as a major constraints for a teeming youth going into enterprise. Without capital, a business can not be accomplished. For a youth to access loan from Bank has been a major problem because average youths of nowadays believes Financial institutions only lend out funds to Wealthy and Influential customers.
But, come to think of it…..In practice of banking things are not done the way most customers thought it is. Banks lends out funds to their customers irrespective of how the financial status of the person is. Bank lending out their funds to customers is also a yield of return on investment(ROI) to banks. Reason being that they tagged an interest payment semi annually or annually for them recouping back their funds.
As a banker, financial analyst, accountant and Economist…..It is known to them that, the value of money changes. A sum amount of money Today is not the same as that same value Tomorrow mainly because of the Economic conditions. Since the funds domiciled in the Bank are depositors funds which is subject to the demand of money by the depositors. So therefore bank can lend out funds to other customers but mainly for short medium of time as commercial bank does. So therefore,
Before a Bank Can lend out funds to their customers it entails a lot of processes.
One of the process is canons of Lending where we have Amount, purpose,duration,repayment and securities/Collateral.
*Amount*; Before a bank can render help to her customers, the Customer will be asked to state the sum of money he/She needed from Bank before taken that into consideration.
*Purpose*; as the second of the General accepted principles of lending. Average Nigerians are obnoxious if they requested for money from a person and they are been asked to state there purpose of which they needs the money for.
*Duration*; as the third of the canons of lending;Most times commercial banks deals with granting of short term loans unlike Merchant banks.
*Repayment*; as the fourth of canons of lending; this is the payback period of which a borrowed funds is returned.
*Securities*; As the final stage of Canons of lending,Bankers lend out funds not for the purpose to Foreclose customers property if eventually the customer is unable to pay But for the purpose to retrieved back their funds from the profitability of the customers business he/She engaged in.
Another aspect Bank look into before payment should be made is on the aspect of 5C’s of Lending. Which are Capital, Conditions, Character, Capacity and Collateral.
*Capital*; Bankers lend out funds to their customers based on the money left for Him/Her in the accomplishments of his Business.
*Capacity*; Before Banks can lend out funds, they look inwardly on what capacity is the customers matured enough to handles the Money and go into its business.
*Conditions*; Bank look at the economic condition of the country before they lends out funds to their intending borrower in other not to engaged in Currency risk & Change of currency.
*Character*; Before Bank can lend out funds they look at the intending borrower past credit records of its deeds. If he pays or not. And lastly
*Collateral*; In some cases banks are unable to recoup their funds, they foreclosed the customer Property if its legal mortgage.
These 5C’s of lending aforementioned are things needed to be observed before a Bank can grants loan and advances to their customers of which it is very good idea in guiding their Employees towards any negligence actions. To customers, Bankers are your friends just like policemen are also. So therefore customers can borrow money from his/her respective banks as far as they can meet their Requirements.
Also, another crucial part to note is that the Federal Government through the CBN should strengthen the banking sector for an improve in credit flows so as to make low interest rate to their customers. Banks can lend money to youths/Customers for them to become a successful entrepreneurs in respect to the 5C’s of lending of which Customers needs to take note of. The initiative brought by her excellency Aisha Mohammad Buhari is a sign of positive change on our teeming youth so as to be self dependent. It is neither limited to Women alone but men also can welcome the style.
– Saliu Ismail Oluwatosin
A Student of Banking and Finance, Kogi State University
+2348140389536.
