The National Institute of Credit Administration (NICA) has said availability of loans with low interest rates and flexible repayment terms will boost profitability of small and medium enterprises(SMEs) in the country.
In a statement signed by its chief executive officer (CEO), Prof. Chris Onalo and made available to LEADERSHIP yesterday, the institute said, a business-friendly loan will encourage intending and existing business owners to borrow to start new businesses, and expand existing ones.
According to the institute, businesses in advanced countries are well positioned to compete better in their countries, and even in other countries where they expand because of access to low interest rate loans which are usually lower single digits.
The statement added that, “It is difficult for businesses to break even with high interest rate loans because the SMEs have other high operating costs which will make repayment a challenge to them. To be better competitors and be empowered to expand their trades, businesses should have access to single digit interest rate loans with flexible repayment options. This is the ideal situation that will boost a business friendly environment.”
The institute advocated support that will enable businesses to thrive better in the country because they provide livelihood to a large proportion of the population.
Access to cheap loans, it stressed, will provide more finance to SMEs, reduce their debt repayment burden, and increase capital for expansion as they will pay less over the lifespan of the loan.
While observing that lending institutions may not want to offer long term loans in some cases, NICA called for flexible loan solutions to help reduce repayment strain on the business owners’ finances.
With access to flexible repayment terms, NICA said, entrepreneurs will avoid patronising loan sharks, and choose from a variety of loan durations that suit their repayment plans, budget and financial goals.
NICA pointed out that cheap loans with flexible repayment terms allow small business borrowers to choose from a variety of loan durations, and plan for their financial stability, adding that the institute advocates good credit access as this will help to reduce the cost of debt and default rates among the SMEs.
Increase in the success rate of SMEs in the country, it noted, will help to boost the country’s Gross Domestic Product(GDP).
