Risks in SME Financing: Experience 2
Mr. Lion, a grocery shop owner, applied for a loan after a long negotiation with our Customer Relations Officer. Since the business was very good to look and had high daily sale, the entrepreneur was also well mannered, the loan officer was very eager to give him the facility of credit. We approved the facility favoring his SME business and after 9 months we found him as a defaulter. When we went to his business to meet him physically to know the exact matter for which the entrepreneur failed to repay his installment we discovered that the entrepreneur flew away from the business and he sold his business to another entrepreneur. We fell in danger to recover the loan since the outstanding amount of that loan was big. We were looking for the relatives of the entrepreneur to discuss and know the method of recovery of loan, and found that the entrepreneur sold his products by credit and he could not collect the credit amount from his customers and he had another loan from local society who were creating pressure on him to repay their loan for which he flew away. It is mentionable that the entrepreneur was unmarried.
Here the cause of failure of entrepreneur to repay the loan was his mistake of sale goods in credit, since the SME businesses own a small amount of capital; they should not loss their capital from their business anyhow. The entrepreneur had lack of proper plan and policy of business, for which the stability of the business fell in risk. Moreover his marital status was also a notable point to his unconsciousness. His managerial skill was poor.
We had collected the whole outstanding amount from his relatives since they were wealthy and helpful enough, though we had to threat them of legal harassment.