Small-scale investors find new ways to survive hard times

As companies face hard times, retrenching workers and reducing overhead cost of production, one would have expected underground businesses to blossom, with these retrenched workers investing some of their monetised benefits in small-scale cottage ventures. Alas, this is not so, as this micro, but essential sector of the economy, is also starved of fund, making operators look in other directions to access the much-needed funds.

Henry Nwosu of Harry Chin Chin said the economy is biting hard, so much that microfinance organisations that are supposed to offer relief are aggravating things.

He said: “They sometimes increase interest rates to 20 per cent, making it extremely difficult for cottage producers, who depend on such capital to expand production lines. But because we have been in business for long and would not want to fold up, we seek help from any available avenue. These other sources are sometimes non-financial institutions, such as family, friendship clubs and even borrowing from people, who are afraid to invest their money, but rely on one’s business acumen to recoup their money.

“For instance, I have just secured a loan of N800, 000 from my town’s union and would pay it back in October, with seven per cent interest for six months. This means when I shall be paying back, the money would have increased from N800, 000 to N856, 000. It is only through this means that one can think of long-term projects, because it is a soft loan. But the opportunity is only opened to those they know are into production and have the integrity of paying back loans.”

Disclosing other means cottage outfit owners have devised to remain afloat in this hard time, when purchasing power is low and costs of raw materials are high, Nwosu said his organisation has adopted a hard marketing/selling drive to increase sales. According to him, instead of waiting for shop owners to come for their products, they go to them. They also go to those places, where they are sure of high patronage.

“We take note of different events, irrespective of the organisation behind them and then approach them to promote our products,” he explained. “Also, we have reduced the quantity of our products during packaging without reducing quality, as a way of meeting overhead cost of production and making profit.

“The measure of the normal N50 wrap of Chin Chin has dropped by two to three per cent, but we still sell at the normal price, so that we will not lose customers. Also, we have introduced some incentives, such as rewarding customers with certain per cent of bulk purchase in a month; this is to drive sales.”

For Aminatu Azeez, who is into fish farming, some people have the money, but do not know what to do with it. Some of them are even afraid of investing, because they are unsure of the returns, especially as government and its agents are in the habit of pulling down shops, arresting hawkers and street traders. So, she locates people with such idle fund, offers interests of five to eight per cent, and some times 10 per cent for a period of three to five months. Most times they jump at it, because it is like growing their idle fund.

She said: “I collect money from people, including friends, when I need to make very huge supplies, because the microfinance firms may foot-drag at such offers and I pay some interest, usually at a very low rate, compared to what the microfinance firms give. I have just finished paying a loan I collected to equip my farm for the various festivals in the year. I paid five per cent on every N100, 000. I am happy and the lenders are also happy, because we both made profits.”

Stressing that one has to be creative and dynamic to overcome the current economic hardship, Azeez said she has to look for other means of adding value to her business, such as drying some of the unsold stock. This, according to her, has opened up a new source of income, which was formerly neglected.

“I have been in the business for sometime, and I cannot leave it now or go into any other business, as fish farming was paying my bills. There is good money in it, just the harsh economy has reduced customers’ purchasing power, and so I have to be creative to retain them. So, I went into fish drying and the result has been good, though tasking,” she said.

In her view, the solution does not lie in folding up, but in being dynamic. She explained that she now has to cater for all classes of people, just to increase her market share of the fish business.

“Now, I cut some of the fish into pieces and sell to people that cannot buy the whole. It may look odd, but so far, there are buyers and I must be ready to dance to their tunes to remain in business. Besides, the retailing idea brings extra income. By the time I cut into two or three a big fish that should go for between N500 and N1, 500, I sometimes earn an extra N200 or N300 as profit. One needs to understand the workings of the time for any small-scale operators to survive,” she said.

Ikenna Duru of Flora Publishers, a small-scale publishing outfit, believes it is during a recession that great ideas come up. He said though capital is hard to come by, but they just have to keep pushing to earn a living. So, he has to devise means of producing interesting and colourful literature books for cutting edge advantage in the market.

“I publish terminal books for primary and secondary schools,” he said. “The cost of printing materials has skyrocketed, yet we have to remain in business. To do this, we go for low quality papers for printing, make the books more colourful to attract readers and not transferable. We do this by creating a workbook section in the books, so that once it has been used, no other person would be able to do so again.

On how he sources funds, Duru explained that since most banks would not give loans to small-scale cottage firms, he and some other people in this category formed a group of 10, with each contributing N200, 000 to N300, 000 weekly. According to him, when such money is gathered, they decide on who needs the fund more urgently and then give it to him/her.

“Sometimes, there would be nobody to borrow money. So, we are left with a pool to draw from, whenever the need arises. I recently got a loan of N3m for the printing of four new books for others and myself against September, when schools will resume. And because it is our money, we pay as little as two per cent service charge to the Secretariat.

“Funding cottage production has always been a challenge and for some of us to overcome, we have to devise methods of pulling resources together. Through this, I have regularly published myself and others, irrespective of the fact that the economy is in recession.”

Another source said small-scale producers raise funds through thrift collectors. Though some say the money the collectors give is limited to the amount each individual has contributed overtime, they are also of the view that moneylenders are discriminatory in the way they give loans. According to Jimoh Aremu, a block-moulder, before thrift collector would give loan, such a customer must have saved with them for some years. Also, they demand high interest rate on the money they give. This is good, only when one is into business, where such money can be recouped within a short time.

“On N100, 000 one could sometimes pay an interest rate of N15, 000 to N20, 000, which is about 15 or 20 per cent per month. This is high and not friendly for most of us whose profits come in bits.

“However, to remain in business, I depend heavily on credit facilities from big time cement suppliers. They supply like 200 bags of cement for the deposit of 50 and come back in two to three months for the balance. Before they come, I might have finished selling their products. Getting credits through this means is highly rewarding and gives us opportunities to explore new grounds,” he disclosed.

Musa Dan Kaduna, a tea brewer (Mai Shai), said business is dull, ‘but we cannot, for that reason, close shop because all the sectors of the economy are also experiencing the same thing.”

On how he has been able to remain in business, he said he had to increase the price of a cup of tea from N100 to N200 to make up for the increase in the cost of tea ingredients.

He said: “As the price of a cup of tea increases, so are such other items as egg, bread and others. However, based on the increase, the profit is no longer huge and I also brew less tea per day, because the customers are dwindling, as a result of the recession.”