More than 150 Business owners and finance personnel met on the 26th of August for an Executive Breakfast Meeting hosted by Mikono Speakers in Dare salaam and discussed as to which is the best way for financing the expansion of one’s business.
This was focused more on expanding businesses with a turnover of Tsh500million into a billion Tsh turnover, as well as businesses which turnover is above Tsh20 billion and is looking forward to expand into a regional level to countries like DRC Congo,Burundi,Rwanda,Uganda,Kenya and other nations. The Executive breakfast panelists were experts who had a wealth of knowledge on both debt and equity as ways of financing their businesses.
The 2nd edition of the Mikono Speakers International Executive Breakfast Meeting, was attended by executives and experts from the financial sector, different senior people and elites from the business community, financial institutions and academia, for discussions on the topic: ‘Expanding your business: equity or debt’ at a breakfast meeting organized Mikono speakers International, and supported by Tanzania Financial services Expo, My Staff check, Dun and Bradstreet credit Bureau.
The panelists included; Adebowale Atobatele General Manager Dun & Bradstreet Credit Bureau Tanzania Ltd ,Sanjay Rughani C.E.O; Standard Chartered Bank,Patrick Mususa: Manager: Projects & Business Development at Dar es Salaam Stock Exchange and Oswald Urassa:Chief Finance Officer at Tanzania Mortgage Refinance Company Limited (TMRC) and Moderated by Ambrose Nshala .
Different experts from the Panel were of the opinion that delegates may choose either equity or debt or even both depending on the nature of one’s business. Equity is not a very common method of financing business in Tanzania because it’s still a new concept for most Tanzanians as we used to be in a closed economy and the DSE was opened late in 1990’s so it emphases for Business to opt for this new concept here in Tanzania. Panelists were of the opinion that most people have been opting for dept part of debt as means of financing their businesses without losing ownership of the business and what is needed is people to have good credit profile and people to become ethical and trustworthy.
Mr Adebowale Atobatele commented that ‘’One reason as to why most people fail to repay loans is because they are borrowing more to finance their Life style rather than to expand their businesses.’’
Equity is when an investor or another business institution buys into the operations of a business, making the former a part owner of the entity. The money invested through the partnership can then be used to support the operations and expansions of the entity for the two to share profits as well as risks.
Mr Partick Mususa Urged that ‘’To list your company with DSE is one of the best and easiest way to finance the Expansion of your Business as for the DSE requirement only 25% shares of your company need to be sold to the public. We have great examples such as the Mwalimu commercial bank plc and many others who succeed because of IPO with more than 200,000 subscribers and their capital is increasing so fast through DSE. This is a great opportunity for other SMEs and Startup companies looking for ways to finance the expansion of their Business’’
Debt on the other hand is when a business entity borrows at an agreed interest rate from financial institutions to support its operations and according to Mr. Sanjay Rughani-The C.E.O of Standard Chartered Bank Tanzania as Tanzanians we need to change our culture, we need adopt good values such as transparency and compliance, to avoid borrowing without discipline and without insurance.
Also in the case of the judiciary we need cases on loan payment defaults to be sorted out quickly as the value of money changes over a period of time. We are really optimistic as for the reforms in the judiciary and some cases have already taken the fast track. Also the new regime is emphasizing more on these values and has waged a clear war on lack of transparency and corruption. This will create a more conducive environment for lenders and borrowers to work together.
While debt is repayable, mostly with interest and within a specified period of time, equity makes the investor a part of the business, with the option to exit at an agreed time.
Mr. Yacine Faqir Director General @D&B Credit Bureau Morocco aired his views that there is one underline denominator which is Trust, if you want to build a strong company you need to build trust with your staff, the same way if you want to build a great relationship with lenders you need to build trust by keeping your part of bargain, thus paying, and what is going on in Africa especially where i come from thus Morocco SME's need to build trust with Lenders.
One reason as to why interest rates are high is lack of trust as most people have been defaulting in paying, once this is changed even the central bank will want to calm down the situation as most Banks keep high interest rates because of fear of losing their money, so we need to build trust between Banks and SME's.
The theme, of 2nd Executive Breakfast Meeting which was full sponsored by Tanzania Financial services Expo 2016, was to expose participants and the entire business community to the advantages and disadvantages of the two sources of funding available to businesses in the country.