SOURCES OF LOANS : BASIC GUIDELINES AND APPROVAL
Loan could be obtained from various sources both nationally and internationally to financing viable projects with low and high interest rates. Loan could be obtained from the following major sources:
1) Commercial Banks:
Commercial banks are one of the major source of loans with a standard lending criteria. Most bank do approve loans to serious customers who had account with them. So establishing a good relationship with a bank as a regular customer will open the door to solve most of your financial needs and in some cases may grant you an overdraft loans dependant on your credit limit.
2) Development banks:
These are banks owned either by the State or Federal Government whose aim is to finance developmental projects in collaboration with some commercial banks in order to enhance co-financing arrangement if the amount of loan is too large. In some cases, the commercial banks serve as the intermediary lender by acting as a “Go Between” the lender and the development bank
Lending rates from the development bank is quite lesser that that of the commercial bank and borrowers may enjoy some kind of grants and subsidies from the Government
The aim of the development bank is to finance small, medium and large size enterprises including social infrastructure projects such as schools, hospitals, bridges, roads ect
3) Private Financiers: Apart from commercial banks, there are several financial companies who give out loans to finance project mostly on an on-going project with interest rate higher than that of the commercial banks. Sometimes participate in co-financing arrangement.
3) International Development Banks/Institutions
These are of two categories:
!) Bilateral Agencies:
These are financial institution set up by individual country with the sole aim of financing project overseas involving joint ventures with local citizens in the project country. Sometimes issue out loans to financial intermediary in the foreign country who then re-lend to buyers of their products for import or independently to borrowers who then finance small, medium and large scale enterprises.
However, bilateral cooperation agreement has to be reached between both countries which will include trade terms and financial aid packages as well.
These are financial institutions involving several counties who pull their resources together with the sole aim of financing projects which could be of interest to all countries or individual country as a member.
Individual country who is a member is known as a” Donor” entitled to receiving loans to financing projects which will be of immense benefit to her citizens. Each country is expected to produce her own quota to the central fund.
As required, a multilateral agreement has to be signed by all member states which including terms and conditions governing the organizations.
However, do to the privatization policy going on in most countries, several government owned financial institutions had been taken over by private individuals either on an outright purchase basis or giving out some percentage of the revenues to the state or federal government in return. In most cases, terms of privatizations still reflect to the terms and conditions laid down by the government to the beneficiary of her citizens.
In the next articles, I shall begin to explain on how project at each level both national and international are being approved.
by Goodnews Adolphus email: firstname.lastname@example.org