African bankers tipped on mitigating insolvency

Business Development Fund (BDF), in partnership with the Association of African Development Finance Institutions organized a two-day training in which participants from across Africa learnt on how to turn around failing projects.

John Kagarama, the in charge of advisory services at BDF said the training aimed at empowering people working in development banks and other institutions in charge of enhancing development in African countries with skills on how to turn around failing projects to save them from insolvency.

“Insolvency comes from many challenges including poor project planning. Many people invest in sectors they don’t master hence business planning is poorly done.  For example, in terms of market, they don’t get enough information and when they start operating, they are overwhelmed. We are discussing to see how these institutions can help play a role in revitalizing these projects,” he said.

Dokpe Akele, the head of remedial management in Nigerian Export Import Bank, who was among the participants, said that across the continent, there is considerable number of underperforming projects and Development Finance Institutions can do much to save them.

“We are talking about new ways to limit insolvency. Businesses go bad. As business development banks, we are interested in maintaining jobs and generating more employment opportunities. We are looking on how we can change things and make businesses survive better. We want to help our customers to turn around their businesses and create more jobs,” she said.

Akele said the skills acquired from sharing the experiences with their counterparts from across the continent will help them to do better their job of money lending while saving more projects and businesses from failure.

“We have to maintain and make rules respected, and at the same time help businesses grow. It’s a very difficult job. We are basically brainstorming to see how we can simultaneously do both and maintain the balance,” she said.

Challenges

Akele said there are many reasons that can push businesses to go bad, but the most critical one is how they are conceived.

People may have ideas which can generate money, but tend borrow too much to the extent of not being capable of paying the loans back, she said.

Besides, some don’t have the knowledge of how to count their profits or turnover and think that all the money in the business is theirs to spend, when it is actually for the banks that lent them capital.

Such people end up spending more than what business is making.

Akele said that sometimes, the collapse of the business is brought about by external forces, such as economic crisis.

“In this situation, the businesses are required to work harder and return the money borrowed from banks regardless of the crisis, while most of the banks tend to play indifference to the prevailing circumstances and insist on just getting their money back,” she said.

Kagarama said the lack of management skills like marketing, human resource management and finance other factors that may lead businesses in failure.

“They lack the skills of detecting the real problems they met as business persons which sinks them into insolvency,” he said.

Possible solutions

Cyril A. Okoye, a training and research manager at the Association of African Development Finance Institutions said a strategy of project evaluation has to be put in place to detect early some of the factors that may sink projects.

“For instance, some of the macroeconomic factors can be controlled, if they are detected early. This includes leadership within the projects and entrepreneurs,” he said

On the other hand, Akele said banks should feel very concerned with the status of the projects and businesses, and act to bring a positive change when it is still possible, before such projects fully collapse.

“Sometimes it’s better to restructure the lending contract and give the client a long period to pay; sometimes you can help them repackage and change the management of the business and advise them that if they want their business to go, the manager has to leave because perhaps it’s the problem to the business,” she said.

Besides, the mentality of doing things alone should be changed and allow more partners to contribute on the business by bringing much money and new ideas, she advised.

The  training are delivered in various countries each year, and they are prepared and hosted by the institution in charge of helping people get income from projects in the hosting country. This year, it was the turn of BDF in Rwanda.

Since 2011 when BDF was established, more than 5,000 projects have been helped to generate money and for now more than 20,000 jobs have been created thanks to the Fund.

 

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