Borrowing For The Capital Market


The recent recapitalization efforts going on within the banking and insurance industry has yielded a sudden interest in the capital gains that the capital market has to offer to existing and prospective investors. Most banks now offer loan packages to customers who’re interested in purchasing shares.

I usually advise investors within the capital market to be cautious when approaching a bank for loan packages. It is important to find out if the interest rates and repayment plans are reasonable so that it won’t have a negative impact on your living expenses and savings goals.

I will be highlighting two banks offering such services to investors. UBA Plc has a share loan scheme offer for prospective and existing investors alike. The rate is 17% per annum and repayment plans are quite flexible. An individual is expected to contribute 40% of the total amount he or she needs for investment while the bank will provide 60% of the funds. For instance, if you need N1mn to purchase First Bank shares, you only need to have N400,000 while UBA will contribute N600,000.

However, you don’t need to be an account holder to have access to this service. It is open to account and non-account holders alike. Please note that you can only use this borrowed funds to purchase First Bank, Union Bank and UBA Plc. Upon purchase, the bank will keep the share certificate until you remit all outstanding borrowed funds.

Intercontinental Bank Plc also offers a similar scheme but the difference is that you do not have to contribute a certain percentage of the stated sum you need. The bank purchases the shares you need and also keeps the share certificate until you pay back all outstanding amounts. (Usually it’s deducted from your monthly salary). For both schemes, you’re required to provide an introductory letter and evidence of a monthly salary via a pay slip from your workplace.

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