Case Study 2 : Dilemma

Biodun took a facility of 1.5 million naira from XY Microfinance Bank to inject into his business. Biodun sells electronics at one of the busiest malls in Ikeja. He makes good turnover but has been unable to meet demands lately. Some corporate bodies have lately started requesting for wholesale supply and 30 days payment terms.

Barely two hours after Biodun got SMS alert for the loan disbursement, he got a call from his sister. She sounded frantic and alarmed. Biodun’s 65 year old mother slumped and has been rushed to the hospital. The doctor diagnosis is a dangerous heart condition that can lead to death within 72 hours if not operated.

Biodun rushed down to Ibadan to see her mother who is still in coma. The surgery would cost 1.5m. Biodun is the eldest of three and his siblings are still in school.

What should he do? Should he use the bank loan to finance the surgery? 

Share your thoughts.

Good morning and have a great week!

Adewumi Oni




Twitter: onadol2010


7 thoughts on “Case Study 2 : Dilemma

  1. Hello Sir,

    These stories are so true, but the analyst should have seen this coming before now because after assessing and analyzing clients business, identifying and migrating the risk involved in business. The same should be done to the family unit, identifying the risks in the family unit
    1. the client is the bread winner in his family
    2. aged persons in the family unit
    firstly, migrating these two points would cut down the clients payment capacity whereby reducing the loan amount or increasing the maturity of the loan to reduce his repayment.

    As regards your question, for the client to get a loan of N1,500,000, his equity should be around N3,750,000 or more.

    My advice is that he should approach his bankers for a parallel loan for his mother health because if he uses the loan for his mother hospital bill, his business would be able to pay regardless but the business would suffer and might die at the end of the day. If N1,500,000 plus interest is taken out of N3,750,000, the net profit would reduce drastically because there would be no reinvestment into the business over the loan period and after the loan period the business, like i said might die off.


    • Thank you Babatunde. Do you think the bank will grant additional loan? I also don’t understand what you mean by equity, most cases, equity contribution is usually between 10% & 30%. Also, most credit evaluation will ask questions about your dependants, and will rely on your response.


      • @Adewumi, the equity is the current worth of a business while the equity contribution is a sort of collateralize down payment for a loan.
        Yes, most loan officers will ask question about dependents and they take your word for it but still would run crosscheck to verify the information given and also they would engage the client with open questions which in turn make clients to talk more whereby disclosing important information about the business and family.

        Yes, Mr. Adewumi, the client can get another loan if his credit record is so bad.

        @Goke, these assessments are done in less than 60mins-2hrs usually and the compilations take more time. An average loan officer is trained to see beyond word and whats on ground, for example; a client who business is worth about 1million and he stays in a three bedroom flat with annual rent of 500,000, he has 2 kids who are in school with school fees of about 150,000 for both of them and he says his wife is a full time house wife, then the loan officer will probe further by asking of other source of income.
        If there is another source of income, then it has to be verified. If there is no other source, then there’s a high risk of the client defaulting because of his family expenses which should around 120,000naira per month.
        Also the purpose of the loan needs to be revisited because there is high tendency that the loan will be used for house rent or the kids school fees.


  2. In real life, Biodun will spend the money on mum’s health care considering his position in the family and his origin (Yoruba). However, the error is from the bankers who disburse into account; it would’ve been better to pay supplier to avoid immediate diversion of fund, while supply could be to the order of the bank. Diversion risk is high in one-man biz around here and everything depends largely on the CHARACTER of the borrower!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.