Faulty Financial System

Faulty Financial System is one of the deadliest causes of business failure. Finance is a major factor to the survival of any business venture. Where there is no adequate finance to fund your business as at when due, business opportunities are missed and the business soon fails. In the light of the above, it is expedient that every entrepreneur knows how and where to source for cheap funds to finance or run his business. However, as essential as this, it is not always easy in most cases because of our faulty financial systems. This system comprises of the structures and policies of financial institutions. In most cases our financial institutions make it very difficult for those who truly desire financial assistance to assess it as at when due. This is as result of their strict and selfish policies which only favors those with good financial standing.

In Nigeria for instance, business loans are given out with strict conditions that will frustrates the survival of any business. They give out loans with no considerable time frame of repayment. For instance, where a bank lends N100, 000:00 to an entrepreneur at a going interest rate of 3% per month, to start a business and expect him or her to make payment monthly to offset his debt within six months, in my own opinion is putting too much weight on the business. When you remove about N20, 000:00 monthly to pay your debt, what will you use to run the business and embrace other lucrative opportunities that may help to sail you to business success? How can you even manage to pay back this loan completely if you do not have enough to run the business? This will lead to business failure if the entrepreneur has no other means of sourcing for funds to run his business.

The bank can make life easier for business owners if they can prolong their loan repayment period. This will prove mutually beneficial to both the bank and the business owner because the entrepreneur will now be able to spread the loan over a flexible time frame and the bank will equally make more money because the more time the money stays with entrepreneur, the more it labored vigorously for the bank. But because the banks are selfishly positioned for quick money, they are paying deaf ears to the pains of the sector they were set up to look after. Instead of helping the small and medium scale enterprises, they are diverting the money to run their privately owned business, and also to lend only to the rich. Thinking that this will solve their problems, it has plunged them into more problems. You cannot solve problems with problems. The rich borrowed huge sum of money to invest in business ventures which never deliver on the intended terms. Now, when these banks go to collect their money from these so called rich people, they are greeted with sophisticated lawyers who use the law to protect the rich and their corporation from litigation.

Some times these loans are given without collateral. Nigerian banks can afford to give loans to the rich without collateral, but will refuse to lend small amount of money to a business owner with viable business concept, but has no collateral. Even when the small business entrepreneur offers pragmatic reasons to support his ability to repay back, he will be turned down because has no connections and can not afford to bribe his or her way through.

A friend of mine who run a school business needed about N1, 000,000: 00 to add to what he had to purchase a piece of land to build a permanent structure for his school. He approached his bank to advance him the loan, but they refuse because he has no collateral. He even told them to buy the land in their name, and transfer ownership to him when payment is complete, but they still refuse. This makes me to wonder what the problem is with these banks. The school fees for a session, was able to pay for this loan. Though, the bank knew this because all his transactions were done through the bank, but they still refuse to help him.

The limiting role of our faulty financial system cannot be overemphasized. Whenever our financial system fails to live up to their mandate, the business that depends on them for sustainability will eventually fail.


If this article has helped you in one way or the other do not hesitate to leave a comment in the post a comment session. In the same vein, if you feel like contributing your input to this article, feel free to make use of the post a comment session.

For more see reasons-why-business-fails