Tunde Kamal, a graduate of economics from the Obafemi Awolowo University, Ile-Ife, Osun State, will soon shut down his nine-year-old poultry farm in Mowe, Ogun State.
After battling many losses in the past four years, the 43-year-old father of two said he would have had a rethink about shutting down his business if he had got access to a “friendly” credit facility.
“All the banks I turned to shut me down; the only one which eventually agreed to give me a loan would only give me N500,000 out of the N2m that I needed, and guess what! The interest rate was 27 per cent. It was killing!” he said.
Lamenting the high cost of running a poultry business, Kamal said just like him, many of his colleagues had lost fortunes.
He said, “Topping the list of our problems is the high cost of poultry feed, which constitutes about 75 per cent of the cost of production. Talking about poultry feed, we mainly use grains like maize, soya bean, and groundnut.
“A tonne of maize is being sold for as high as N160,000 as against N50,000 in some countries. Soya bean is being sold at about N135,000 per tonne as against N80,000 in some countries. The cost of running a poultry farm in Nigeria is too high.
“And like I said before, our other big problem is the inability to secure a loan to expand our business. When we finally get one, the interest rate could make you commit suicide if you’re not mentally strong.”
In search of solace due to his depressing condition, Kamal recently visited his long-time friend, simply called Johnson, who became the pastor of a Lagos Pentecostal church shortly after they both graduated from the university.
To his amazement, Johnson would soon complete his glittering church edifice after securing a N15m loan from one of the commercial banks in the city. After hearing this, poor Kamal was thrown in a lather.
“I asked Johnson how he would pay back the loan since he’s not working in the secular sense or running a business, and he told me it would be repaid from the church’s tithes and offerings,” he told Saturday PUNCH.
Kamal has not yet got over the shock since December 2017 when he visited his pastor friend.
Churches, commercial banks’ new bride
Commercial banks are expected to provide credit facilities to viable profit-making organisations such as corporations, small and medium-sized businesses, but not to religious houses such as churches.
But, Saturday PUNCH findings revealed that churches — notably those in big commercial cities such as Lagos, Abuja, Port Harcourt and Warri — are the new bride of commercial banks, with the latter dishing out millions of naira in loans to churches which need such facilities.
Investigations further revealed that churches use such credit facilities to purchase land, build auditoriums, and occasionally establish ventures such as schools and hospitals.
To get access to credit facilities readily, our correspondent learnt that some churches now take bookkeeping seriously, with some of them employing accountants and internal auditors.
And to pay back their loans, they are expected to open “special” loan accounts with the commercial bank that they are securing a loan from and remit every month an agreed percentage out of the tithes and offerings that they collect from the congregation.
A source in one of the commercial banks in Lagos, who is a loan procurement officer, said, “Yes, we give loans to churches, most especially the Pentecostal ones, at an agreed rate; that is, they tell us how much they can be remitting at the end of every month from their tithes and offerings, which are basically their sources of income.
“If the church already has an account with us and we know how consistent it is in depositing money with us, it is easier. We just have to open a special loan account for them, wherein they pay back their loan from their tithes and offerings. Some pay the agreed amount every week while some pay every month. It depends on the church’s modality of collecting tithes and offerings.
“We, however, don’t just give out loans because they are churches. They must have met certain conditions; for instance, we look at the size of their congregation, account records, consistency of cash flow, and so on.
“I know a church that got a N50m loan facility from us about three years ago and they built a lovely auditorium on Victoria Island (Lagos), and now they are paying back. They are conveniently paying us back from their tithes and offerings.”
Asked if the bank had given out such a loan facility to a small business in recent times, the official replied in the negative, stating that “so many small businesses are not as lucrative as churches these days.”
He said, “In my 17 years of banking experience, seldom do small businesses thrive in Nigeria. They rarely turn in good profits that could make them attract loans. If we are going to give you a loan as a small business owner, you have to really convince us that your business is highly profitable. And even at that, you don’t get millions of naira as loan.
“Churches, on the other hand, are more profitable than small businesses. I have pastor friends that I’ve helped secure loans. The tithes and offerings are sure to come in every week, so they usually have no problem in paying back. And don’t forget that we are also in the business of making profit. We can’t give out loans to those we are not sure will be able to pay back conveniently.”
A Lagos-based psychologist, Dr. Femi Alaofin, said the idea of churches obtaining loans to build auditoriums could be a way of “enticing” and growing membership.
He said, “Today, churches want their buildings to be alluring to the people. If your church building looks lovely, there is a likelihood that you will attract more members.
“For instance, I have a pastor friend in Ketu (Lagos) who has been toiling day and night to make his church look contemporary; his belief is that if the building looks great, elegantly equipped with lovely musical and sound systems, it will appeal to the rich or at least the middle class.
“Once they come to church, they will pay tithes and offerings. And, of course, there are several services he holds every month. At each of those services, offerings will be collected. So if my friend has obtained a loan to achieve his dream, you can be sure he will be able to pay back.”
‘Churches are more profitable than small businesses’
In its 2017 survey of religious beliefs of 68 countries of the world, Zurich, Switzerland-based polling organisation, the WIN/Gallup International, described Nigeria as the second most religious country in the world, after Thailand, with the populace evenly divided between the largely Muslim north and the predominantly Christian south.
Moreover, according to 2017 data from the Washington, D.C., United States-based Pew Research Centre, Nigeria has the largest number of Christians in Africa, with a membership of 86.5 million out of the country’s estimated 180 million population.
Originating in the form of evangelical student revivals, a wave of Pentecostalism had spawned new charismatic churches in the 1960s and 1970s and since then, the new churches have never stopped growing in number; in fact, a 2006 World Economic Forum Pentecostal Survey stated that Pentecostalists accounted for approximately six in every 10 Nigerian Christians.
Meanwhile, according to the Harvard Divinity School of the Harvard University, US, unlike their counterparts in Orthodox churches, Pentecostalists believe that to live a more fulfilled life, the people must solve the problem of poverty, a teaching that has attracted hundreds of thousands of the poor and middle class aspiring to get out of poverty.
“This approach provided the foundation for many of our Pentecostal churches today, and to attract new members and make the church conducive for them, they tend to spend a lot on building nice edifices. How good-looking your church is determines what class of people come in,” said Alaofin.
Explaining to our correspondent why his bank would rather lend money to a church than to a small business, a loan procurement officer in one of the popular commercial banks in Lagos, simply named Kunle, said banks often look at the profitability of an organisation and necessarily not at their nature.
He said, “Note that we are not in the charity business; apart from the big businesses, no bank right now in the industry would just dole out loans to small businesses. They seldom pay back on time, if they pay back at all, unlike churches. Churches don’t want to be harassed and so they don’t default in their loan repayment, but most small business owners don’t give a damn if you threaten them. Churches have more integrity and surer sources of creating wealth.
“I remember that even when the economic recession was biting harder, churches were approaching us for loans; some of them couldn’t embark on some projects with their savings alone. We gave them loans and one thing we discovered was that despite the recession, they were still making money, even though it wasn’t as pre-recession. Even at that, no church that I knew of folded up during the economic meltdown, but many small businesses did. Can you now see our logic?”
The logic is perhaps glaring.
Speaking to Saturday PUNCH in an email, the President, Association of Corporate Affairs Managers of Banks in Nigeria, Mr. Charles Aigbe, said banks had the responsibility of managing their depositors’ funds to get the maximum returns.
He, however, argued that commercial banks had no special preference to extend loans to churches than to small businesses, saying that once an organisation meets a specific bank’s criteria for loan application, it doesn’t matter what their nature of business is.
He said, “Different banks have their risk acceptance criteria, which address how they lend and who they lend money to. These would cover exposure to either small businesses or churches/religious associations and to other borrowers.
“The risk acceptance criteria would generally show the capacity of different borrowers to meet their loan obligation and, thus, the amount of loan that may be granted such borrowers. The risk acceptance criteria will usually include the cash flow generating capacity of the borrower.
“Banks have the responsibility to manage how they use depositors’ funds to extend loans and it is very important that loans are given to borrowers with the capacity to repay the loans, regardless of the nature of the business of the borrower.
“There is, therefore, no specific preference for extending commercial loans to churches or other religious bodies in contrast to extending loans to small scale borrowers or other borrowers.”
The President of the Association of Small Business Owners of Nigeria, Dr. Femi Egbesola, said although it was pathetic that it’s easier for churches to secure loans from banks than small businesses, he wouldn’t blame the banks, but the Federal Government which had made it difficult for small businesses to thrive due to the harsh business climate.
Citing multiple taxation, high interest rate and poor infrastructure, Egbesola said if the government was serious about making SMEs contribute to the Gross Domestic Product of the country, it would ease the business environment for them.
A 2018 Global Competitiveness Report of the World Economic Forum had ranked Nigeria 131st out of 137 countries in terms of infrastructure quality, and 125th overall in terms of ease of doing business.
Commenting on churches’ easier access to credit facilities than SMEs, Egbesola said, “This is why churches are buying factories while factories are closing down. While churches are expanding in every street of the city, small businesses are folding up. But you know, churches don’t pay tax, whereas small businesses are levied with multiple taxes. Due to this, it is easier for churches to repay loans than small businesses.
“If a small business makes let’s just say N1,000, you can be sure that about N900 will be spent on taxes and other operating expenses. But you know what! If churches grow in number, they don’t impact the economy, but small businesses do when they grow.
“However, in all of these, it is the government that is to be blamed. I don’t blame the banks. For instance, if you were the owner of a bank, your aim would be to make profit. Banks have the right to invest in what is profitable to them. They also have to pay salaries and they run their operations on fuel and diesel, they make lots of investments and they need to get their money back.”
Although commercial banks in the country reached a deal in 2016 through the Bankers Committee, headed by the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, to commit five per cent of their profit after tax to the agriculture and SMEs sectors, Egbesola said the development had yet to materialise.
The fund, tagged the Agriculture/SMEs Fund, had been inaugurated by the CBN to facilitate the disbursement of a N26bn equity pool meant for the growth of agriculture and small businesses in the country.
Egbesola said, “The Bankers Committee agreement is still on paper. We have always clamoured that small businesses be given loans at discounted rate. That’s what can make them to thrive. So, the government needs to play an active role here.
“Imagine, small businesses are given loans at between 23 and 28 per cent interest rate, so most of us don’t even go to the banks anymore. The business environment is just not fair to us. If the government really wants small businesses to succeed, it knows what to do. It is the policymaker and enactor.”
When Saturday PUNCH sought the reaction of the Central Bank of Nigeria on the issue, the Acting Director of Corporate Communications of the apex bank, Mr. Isaac Okoroafor, did not respond to repeated calls made to his mobile phone.
Three text messages sent to him, though delivered, were also not responded to.
Likewise, emails sent to the apex bank’s Department of Media Relations (cad@cenbank.org) and the Department of General Enquiries (info@cenbank.org) on Wednesday evening have yet to be responded to as of the time of publishing this report.
Expressing his thoughts on the phenomenon of churches having easier access to bank loans than SMEs, the Head of Research, SCM Capital Limited, Mr. Sewa Wusu, also said the government needed to do more to make small businesses attractive to credit facilities, as they are the economic engine of any nation.
Wusu noted that although the Federal Government had been making some needed interventions in the economy, particularly in the agricultural sector, it needed to do more in creating a conducive climate for businesses to thrive.
He said, “Why churches are having it easier to secure loans is because whether the economy is bad or not, members are always encouraged to pay their tithes and offerings. Faith is a very strong thing, and it’s good business for banks.
“When you look at the issue of non-performing loans that some banks have incurred, you can’t blame them if they put their money in what will give them ‘sure’ returns because if they keep incurring non-performing loans, they will need to eventually write them off and this will ultimately affect their profit base. Meanwhile, their aim is to make profit.
“Small businesses, on the other hand, are not usually profitable because of the harsh business environment in the country. Imagine getting a loan facility at 30 per cent interest rate, how can a small business pay back? There is no stable electricity, there are bad roads, and so at the end of the day, the profit that a small business makes is meagre.
“I believe there are interventions that the present government has made in agriculture which have helped the sector to grow. But the problems are still many and the government should not relax. We still need to do more for the microeconomic environment to thrive.”
Also in his opinion, a professor of economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella, said since banks were established to make profit, it doesn’t matter who they extend loans to as long as they get their returns.
The don also explained that churches and banks had somewhat turned out to be good business partners, because when the former collect tithes and offerings from the congregation, they deposit them in accounts, thus helping banks to grow their capital base.
Tella also advised SMEs to learn to keep proper financial records for them to be able to access bank loans conveniently.
He said, “So many small businesses cry foul when they shouldn’t. Some of them don’t have proper records to present to banks to access loans. Some of them approach banks without bankable proposals.
“Meanwhile, banks will only give loans to those who can return their money on time and with profit and I think churches make quick and good returns from tithes and offerings.
“Then, when you look at the issue from a business perspective, churches help banks to increase their capital base as they deposit their tithes and offerings with them. It’s all about profit-making and banks shouldn’t be blamed.
“When they give loans and can’t get them back on time, they will also be unprofitable. So, I don’t see any reason why banks should discriminate in giving loans to churches or small businesses, as long as they get their returns.”
The don also maintained that churches had in some cases helped to contribute to the economy of the country.
He said, “When you look at churches that obtain loans to run enterprises such as schools, we can’t say they are not contributing to the GDP. Some of them have schools and hospitals and as such they are employers of labour.
“However, in a case like this, the bone of contention has been that such church enterprises should be made to pay tax; I agree. Such church-run businesses should not hide under the cloak of church and not pay tax.”
PFN responds
As the practice of obtaining loans is common to Pentecostal churches, according to Saturday PUNCH findings, our correspondent reached out to the National Publicity Secretary of the Pentecostal Fellowship of Nigeria, Bishop Emmah Isong, who said he had never heard that banks give loans to churches.
“Maybe such loans are given to businesses run by the church, such as schools and hospitals,” he said.
“Be that as it may, as a banker by profession, let me say that banks won’t just give out loans because you are a church or small business. There are parameters that they always look out for, such as integrity, liquidity, turnover, and once you meet those criteria, you will get the loan.
“Banks don’t care if you are a juju priest or Christian priest or imam as long as you meet their conditions.
“Note that banks run on deposited funds and if churches are more qualified to get their loans, I don’t think they are doing what’s wrong. The banks are not charity organisations.
“They are in the business of making profit and if they perceive churches as more profitable than small businesses, you can’t blame them.”
