PERSONAL GLIMPSES A CALL TO BUSINESS (2) By: Winstanley R Bankole Johnson Courtesy demands I open this “Call To Business (2)” with profuse apologies to Mrs. Claudette Ahiabor (Nee Jackson), CEO of CBAA Incorporated of 20 Signal Hill Road, Freetown for erroneously referring to her business in my “Call to Business (1)” as a “Nigerian Enterprise”. Through contacts facilitated by “Awoko” Newspaper, Mrs. Ahiabor, a Lecturer at IPAM in the University of Sierra Leone informed me that like me, she is a “bona-fide” Sierra Leonean (married to a Ghanaian), and that she is neither Nigerian and further (very unlike me), has never visited Nigeria nor does she have relatives there. I apologized and promised a retraction as I am now doing. True to her entrepreneurial zest, she closed our SMS chat with a subtle advertisement of her other “SMILE” Products range of Fruit Juices, Liquid Soaps, Floor Cleaners and Shower Gel, all of which are I have tested and found to be of very good quality . Congratulations once more CBAA Incorporated SL. “Piggy-Backing” An avid reader of our contributions phoned me to enquire as to who between Mr. Andrew Keili and myself was the actual author of a piece captioned-: “SCHOOL ALUMNI ASSOCIATIONS: UNSUNG HEROES“ - correctly published in his name in the “Awareness Times” under his “Ponder My thoughts” column of 28thAugust, but inadvertently attributed to me in the “Global Times” of same date as “Personal Glimpses. My forthright response was to admit that that it wasn’t my handiwork, but concluded that for all the good I have done to Mr. Keili, I see absolutely nothing wrong in momentarily “piggy-backing” his scholarly erudition even for just one day. The “Global Times” can might as well just attribute this piece to Mr. Keili to correct the error. Case closed!! Truism I closed my last submission on “A Call To Business (1)” with the general outcry among Sierra Leoneans that the local Commercial Banks are far more liberal in their lending posture to foreigners. One reason for such truism is that some of us do not conduct our affairs in a manner that will make Bankers positively disposed to our borrowing requests. It is not that businesses of foreigners are not shrouded in secrecy either, but they just seem to have a special knack for pretending to be big until they actually grow big. Business Rankings Upon assuming the reins of governance in 2007, and realizing that creating and strengthening of the small – medium size enterprises was fundamental to sustaining a middleclass economy, the APC introduced new paradigm shifts in the areas of business documentation and registration under the acronym “one- stop-shop” by which single process several steps previously considered barriers or business impediments, such as pre-payments of fees and taxes even before commencements of operations were eliminated. Unlike previously, one can now open and complete business registration documentation within as few as two working days. Once that took roots, Sierra Leone was then declared “open for business”, yet another call sign both to stimulate local as well as foreign direct investments. This was followed by a transformational workshop in the UK spearheaded by President Koroma. On the home front, substantial efforts by several local regulatory and business dialogue for a including the Sierra Leone Business Forum, Sierra Leone Investment and Export Promotion Agency (SLIEPA), and to some extent the S.L Chamber of Commerce Industry and Agriculture have all significantly contributed to an upward movement in Sierra Leone’s overall Ranking in the “World Bank Doing Business Analysis” by 20 places within the last five (5) years from 160 to 140 from among 185 countries globally. Financial Intermediation As complementary vehicles to drive government’s “Agenda for Change” and the citizens’ subsequent transformation unto “Prosperity” by year 2035, two other innovations have since been introduced to wit: (1) Credit Financing by the International Finance Corporation (IFC), a Financial Intermediation subsidiary within the World Bank Group by which Foreign Exchange covers and other venture capitalization project financing can accessible through the local Commercial Banks and (b) Direct Access to Credit from the Commercial Banks under the Credit Reference Bureau guidelines introduced by the Bank of Sierra Leone under the Credit Reference Act of 2011. Both instruments are intended to fast track access to financial intermediation based on satisfactory account relationships/performances and irrespective of nationality. But a few questions immediately come to mind about those two innovations such as-: Are information on them being properly marketed? To which extent have their implementations benefited the local entrepreneurs for whom they are intended in the first place? In short, are they genuine business calls or manipulative corporate disincentives to local businesses? Let me restrict this week’s piece to the IFC Credit Assistance to the business sector. IFC Credit Financing The International Finance Corporation offers investment, advisory and asset management services to encourage private sector development in developing countries. It is a member of the World Bank Group set up to promote economic development by investing strictly in strictly for-profit and commercial projects geared towards reducing poverty and promoting development. But the loudest the local public has ever heard about the IFC financing as a Bank product in Sierra Leone, especially for the small – medium size type importers was either from the Central Bank or Minister of Finance upon its introduction. The local Commercial Banks would seem to have taken far lesser interest in marketing it because of its potential to tilt their own lending or trade finance portfolio. It is not well advertised as an alternative or even more favourable source of foreign exchange financing and customers who knew about and dared to access it are “penalized” – so to speak - via “double” Bank Charges, thus making it a very unattractive option. For example, with respect to Letters of Credits transactions specifically, the standard 3% commission fee of the IFC is matched by an “additional” 3% also charged by the Commercial Banks (making a total of 6% for the applicant upfront) irrespective of the fact that “forex covers” for the transactions are not coming from their Banks’ books. Kill Businesses That aside the Commercial Banks further proceed to charge fresh Limit Arrangement Fees – for the L/Cs – irrespective also of the fact that settlement upon maturity will ultimately be coming from a current borrowing facility for which one might already have been charged a Limit Arrangement Fee and worst of all, as if to “kill”businesses, the local currency counter-value of the entire L/C amounts are debited to the customers accounts equally upfront (i.e. on the very day the L/C is opened – rather prematurely in fact), irrespective of the L/C “tenor”. The argument of the Commercial Banks is that as with all IFC arrangements, the transactions (L/C) costs are automatically recovered from their “Nostros” once they are opened, and as such they too are obliged to simultaneously cover all such exposures on their accounts by also immediately debiting their customers. So from the minute an L/C is opened, one begins to pay “overdraft interest” even before shipment of one’s goods. Add to it all the Bank’s normal “opening, amendments and settlement” charges, and the ultimate losers are of course the consumers, because businesses will be equally obliged to recover all “unnecessary” expenses. So how and why should government expect importers to be honest? Whilst the government is pushing one idea to articulate business growth and ameliorate the challenges inherent in their very existence to promote prosperity, the very implementers of those various projects are following totally different agenda – ideally that for poverty instead. And this is not only restricted to within the Banking industry; it is affecting virtually everywhere requiring integrity, from the Dove Cut Traders who scoop sales by cup, to Business Executives operating within the comforts of air-conditioned offices. Pro-Poor Impact A business that is able to attract financial intermediation from whatever legitimate source and at far cheaper costs or with less encumbrances from the Commercial Banks, will certainly be able to do more both for itself and the country. And by way of solutions in that regard the Bank of Sierra Leone, the Ministry of Trade, the SL Chamber of Commerce, the SL Business Forum and even more particularly the IFC (who from discourse appear to be unaware of challenges to accessing their own assistance) must collectively work together with the SL Association of Commercial Banks to enhance public awareness of their product and hence make it more marketable, more attractive and more participatory, if their interventions must create the desired pro-poor impact within the wider small – medium size business community. Next week I shall attempt address the challenges Bank customers are likely to encounter with the Credit Reference Bureau recently introduced by the Bank of Sierra Leone.
Posted on: Sat, 31 Aug 2013 12:48:32 +0000
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