How To Start A Bank With 500k
Wait a minute. Before you accuse me of deception or even fraudulent claim, you will just have to listen to me and the only way to listen to me is to read till the end of this article. If at the end, you think I am not talking sense, then I accept all the insults you may hurl at me.
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Here we go.
Now, the two major functions of a bank are:
1.To grant loans and advances. In fact, that is where the banks make their money. When you have a great business, they beg you to come and access funding. All the blue chips without exception use bank funds.
2. To accept cash Deposit. It is this cash they receive from you and me they lend to the big boys.
Now, I know there are additional functions of the bank like opening a letter of credit, foreign exchange transactions, receiving funds for shares and others like that.
Your own bank will be unable to do all these, in fact your own bank will not be able to receive cheques and dividend paymenst into accounts, but it will be able to receive cash and be able to advance money. And it will be legit.
What Do You Need?
You will of course have to be educated unless you float it and ask an educated person to run it for you
Like all businesses you must have a passion for this business.
Very close supervision. This is obvious, as you are dealing with human beings and using money as your raw material.
Capital To Start. About N500k, or less will do.
Market.You will need to segment. Figure out a region or locality and target it. Even banking in Nigeria now encourages localization and rationalization. Hence you find in some banks operating only in some regions. You cannot cover the whole country. No you are not First Bank. Besides, your portfolio cannot cope.
Staff. You will need educated staff with sound O level and OND. They will take good care of the footwork.
The manager will of course hold a degree or older and experienced with lower qualification.
The business needs a reliable receptionist as the front office manager. This person has to be fluent in English and be very confident. You will find out why later.
Where to get the staff? The best way is to poach the top level from existing institutions doing the same business.
We will train the others for you. Or the poached man does the training.
You need an office in a suitable location in your territory. Must be accessible by road and not in a corner. You are not selling Burukutu.
A computer and necessary software.
Office furniture. You can start with 2 tables and chairs and elevate the standard when the money comes.
A car if you can afford.
License. To have the law backing you, you will require a license.
In this business, we will not need to go through all the bureaucratic bottlenecks of the CBN.
Yet the business remains legit. There is a loophole in financial institution’s registration, which we will exploit to have you registered and covered.
And you know what, it is not impossible to obtain. We get it for people in under a month.
Modus Operandi. People are always in short supply of money.
As I said earlier, the big companies can do with more cash. We all can always do with more cash as we all wish to get bigger.
Therefore, there is not of customers, but you cannot be accepting them all. You do due diligence or what the bankers call credit appraisal.
You accept some collateral like cars. Cars are mostly used.
You also ask for credible sureties etc.
The poached eminent man should be able to tell you all the books you need to keep and how to make sure your fund is safe.
Mode of Repayment. Your debtors pay back on a weekly basis for understandable reasons.
They must not be allowed to “sleep away” and possibly forget their obligations.
This way your fund is protected. Before they take the loan they must deposit about 15% of fund sought, this takes care of the cash receipt function.
Your Clients. Of course, you cannot lend to Guinness or Nigerian Breweries. Your clients are those on the D-rung of the economic ladder. Petty traders, artisans and low level salary earners, You will have more than enough.
The Model. This is the model. You must have seen many companies doing this business of lending money to artisans, petty traders, low-level salary earners.
They hire a lot of people and they are doing good for themselves. In Oyo state here we have many of them, You can start one in your locality.
If you start with 500k and loan out 20k each, that is 25 clients. Of course, you won’t loan out all your capital at a go.
No financial institution does that.
You now get the model. You may call it money lending. I call it banking.
If this sound like an idea you will like to pursue. Give me a message on firstname.lastname@example.org