BOI a Leading Development Finance Institution:
Table of Contents
GUIDELINES ON HOW TO OBTAIN BOI LEATHER FOOTWEAR FUND
THE RATIONALE FOR THIS MODERN APPROACH:
To operate an inclusive economy there is need to –
- Revitalise the Nigerian leather industry as the nation looks inwards to generate additional revenue from the non-oil sector.
- Increase the ability of local finished leather goods producers to compete globally and with imported products. Imports from China currently account for 90% of the Nigerian FLGs domestic market leaving Nigerian producers with just a 10% share.
- Target the consolidation and expansion of market share in neighbouring West African countries which is under threat due to poor quality products.
- Modernize the leather goods production process by providing local producers with access to finance for purchase of modern equipment and working capital.
- Substantial increase in the industry’s employment level.
- Take advantage of the “Markets for Development (MADE)” project being promoted by the DFID to assist Aba’s finished leather goods’ cluster with access to appropriate technology as well as access to the international market, increase their economic activity and trade, create jobs and raise incomes of the artisans.
TARGET MARKET/ CRITERIA:
Furthermore, the fund will be accessed by limited liability companies and enterprises across the country that use leather for the production of finished or semi-finished shoe, bag and belt products for the local industry as well as for export to foreign markets.
PROJECTED IMPACT
Direct Employment Indirect Employment
Small Scale 5-8 25-40
Medium Scale 15-24 75-120
PROGRAM LIMIT:
N1.0 Billion for the first phase of the program.
SINGLE OBLIGOR LIMIT:
For the various components of the leather goods value chain, the following loan limits are recommended:
SHOE UPPER PRODUCTION:
Term Loan: N10.0 ~ N40.0 Million
Working Capital: N 2.5 ~ N10.0 Million
Total: N12.50 ~ N50.0 Million
SHOE SOLE PRODUCTION
Term Loan: N10.0 ~ N40.0 Million
Working Capital: N 2.5 ~ N10.0 Million
Total: N12.5 ~ N50.0 Million
FINISHED SHOE PRODUCTION
Term Loan: N10.0 ~ N40.0 Million
Working Capital: N 2.5 ~ N10.0 Million
Total: N12.5 ~ N50.0 Million
BAG PRODUCTION
Term Loan: N10.0 ~ N40.0 Million
Working Capital: N2.5 ~ N10.0 Million
Total: N12.5 ~ N50.0 Million
BELT PRODUCTION
Term Loan: N10.0 ~ N40.0 Million
Working Capital: N2.5 ~ N10.0 Million
Total: N12.5 ~ N50.0 Million
PRICING:
Term Loan
Interest Rate: 9% per annum.
Fees: 1% Processing fee
TENOR: 31/2 to 5 years inclusive of moratorium
MORATORIUM: 6 – 12 months (from date of loan disbursement)
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GUIDELINES ON HOW TO OBTAIN BOI LEATHER FOOTWEAR FUND
SECURITY
Loan Amount (N’m) Security Arrangement
- Specific charge over the equipment financed.
- Irrevocable Personal Guarantee of the Chief Promoter of the company.
- Two (2) external guarantors acceptable to BOI who must belong to any of the following categories:
- Senior Civil Servant (Level 12 and above).
- Bankers (not below the level of Assistant Manager) and must have been confirmed by current employer.
- Professionals i.e. Medical Doctors, Lawyers, Accountants, Engineers, etc.
- Senior Staff (not less than a manager) of reputable quoted Companies, International Oil Companies, Telecommunications Companies (GSM providers)
- The guarantees must be supported with a Notarized Statement of Net worth acceptable to BOI.
- All assets debenture.
- Irrevocable Personal Guarantee of the Chief Promoter of the company.
- One (1) external guarantor acceptable to BOI who must belong to any of the following categories:
- Senior Civil Servant (Level 12 and above).
- Bankers (not below the level of Assistant Manager) and must have been confirmed by current employer.
- Professionals i.e. Medical Doctors, Lawyers, Accountants, Engineers, etc.
- Senior Staff (not less than a manager) of reputable quoted Companies, International Oil Companies, Telecommunications Companies (GSM providers)
- The guarantees must be supported with a Notarized Statement of Net worth acceptable to BOI.
Or
Bank Guarantee from Commercial Banks acceptable to BOI.
- Legal mortgage on pledged property.
- Irrevocable Personal Guarantee of the Chief Promoter of the company.
Or
Bank Guarantee from Commercial Banks acceptable to BOI.
GUIDELINES ON HOW TO OBTAIN BOI LEATHER FOOTWEAR FUND
FUNDING STRUCTURE
Loan – 90% maximum for equipment and working capital.
Working Capital – could also be provided by the SME-friendly banks and in that case, BOI’s loan shall be limited to equipment procurement).
Equity – 10% (minimum) by the promoter(s)
For an existing project, the estimated value of the factory building and/or relevant processing equipment, may be applied against the borrower’s 10% contribution. The factory building and/or equipment must be valued professionally by any of BOI’s accredited valuers.
GUIDELINES ON HOW TO OBTAIN BOI LEATHER FOOTWEAR FUND
LOAN DISBURSEMENT:
Term Loan:
Additionally, in phases in accordance with agreed milestones and shall be backed by provision of performance bond by the accredited equipment suppliers (where the suppliers demand for advance payment before delivery of the equipment).
Working Capital:
After successful installation and testing of the equipment and payment shall be made directly to raw materials suppliers.
REPAYMENT SOURCE:
From the cash flows generated by the operations of the project
LOAN REPAYMENT MODE:
As a matter of fact, monthly by direct debit of customer’s account domiciled with the participating SME-friendly bank on the basis of a Tripartite Agreement signed between BOI, the SME-friendly Bank and the Customer. Such direct debit collections must be remitted to BOI within 24 hours. In the event of default, the SME-friendly bank must notify BOI within 24 hours to trigger prompt remedial action by the Bank.
In the alternative, the borrower should also submit post-dated cheques in line with the loan amortization schedule.
Visit www.boi.ng/apply/ to apply online. And more information here
On the Guidelines on how to obtain BOI leather footwear fund, as professionals, there are a lot we can do for you in your business. Keeping your business accounts including internal control system, auditing, taxation, CAC documentations and others. Contact us immediate if you have such need.
Deacon Anekperechi Nworgu, a seasoned economist who transitioned into a chartered accountant, auditor, tax practitioner, and business consultant, brings with him a wealth of industry expertise spanning over 37 years.
