The Nation Newspaper

Tag: Microfinance

  • Microfinance takes banking, credit to grassroots

    Despite Nigeria’s estimated $376 billion Gross Domestic Product (GDP), large population, huge market for microfinance banking and increasing number of micro-enterprises, over 60 per cent of its 191 million people still live below the poverty line. Poor access to financial services and credit by small businesses have been largely blamed for this development. The need to bridge the huge financing gap and reach the un-served market prompted the Central Bank of Nigeria (CBN) to initiate a Microfinance Policy Framework aimed at taking banking and credit to the grassroots, writes COLLINS NWEZE.

    Microfinance banks have, for centuries, remained at the centre of economic growth through funding for Micro Small and Medium Enterprises (MSMEs).

    Great economies grow on the strength and capabilities of their MSMEs.

    Likewise, development patterns across the globe have shown the roles played by MSMEs in resource mobilisation and the emergence of an industrial economy through the support of microfinance banking. Microfinance is the provision of financial services to the poor, who are traditionally not served by the conventional banks in order to alleviate poverty and promote savings culture at the grassroots. These financial services include credit, micro-leasing, money transfer and payment services.

    The smallness of loans advanced and savings collected, near absence of assets–based collateral and simplicity of operations are some of the attributes of microfinance banks. For instance, in Asia, Europe and North America, MSMEs play significant functions in the growth, development and industrialisation of their economies as they have been nurtured to achieve that objective.

    However, Nigeria remains an exception as MSMEs have largely performed below expectation as a result of poor access to credit, among other challenges.

    It was the need to reverse the trend that prompted the Central Bank of Nigeria (CBN) to institute the Microfinance Policy Framework in December 2005.

    CBN Director, Other Financial Institutions Department, Mrs. Tokunbo Martians, explained that it was in response to the challenge of financing the real sector namely the Micro, Small and Medium Enterprises (MSME) and rural finance.

    She said the objective behind the establishment of microfinance banks in Nigeria was to provide diversified, affordable and dependable financial services to the active poor, in a timely and competitive manner.

    The policy, she added, is to serve as guide for the activities of informal, unregulated institutions as well as new entrants in the sub-sector. The policy is aimed at ensuring that operators within the sub-sector are guided by a set of rules, principles and robust legal framework.

    Mrs. Martins, who spoke during the CBN workshop for financial journalists in Gombe State, explained that government’s initiative to meet the socio-economic complexities (needs) of the rural communities and reach rural areas, resulted in the establishment of community banks (now micro-finance banks).

    “Community banks emerged to meet the needs of the poor in order to increase their access to finance and improve their income generating activities. However, the failure of these community banks has resulted in the establishment of Microfinance banks in Nigeria. The government’s initiative to meet the socio-economic complexities (needs) of the rural communities and reach rural areas, resulted in the establishment of community banks (now microfi-nance banks). Community banks emerged to meet the needs of the poor in order to increase their access to finance and improve their income generating activities.  However, the failure of these community banks resulted in the establishment of Microfinance banks in Nigeria,” she stated.

    She noted that the regulator is doing a lot to de-risk the sub-sector by introducing collateral registry and credit bureau to enable them to lend to potential borrowers.

    In 2008 the CBN released the guidelines for the licensing, operation and regulation of credit bureaus, which were revised in 2013. The objective of the guidelines is to define the licensing, operational and regulatory requirements for a privately owned credit bureau under the CBN Act 2007, No. 7.

    Also, in 2015 the CBN created the National Collateral Registry (NCR), which enables easy access to credit by small businesses.

    A former President/Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, who also spoke at the workshop,  said the existing Microfinance banks are trying to compete with conventional banks and the CBN personnel examine them as if they are examining conventional banks.

    “One of the main objectives of Microfinance banks in Nigeria is poverty alleviation. As presently constituted, the existing Microfi-nance banks have not reduced financial hardship nor have they helped to build income and poverty reduction. The financial inclusion gap in Nigeria is very wide and the restructure of its operations by adopting Microfinance policies rather than looking at Microfinance banks with the lens of conventional commercial banks. In setting up the National Microfi-nance Banks, the CBN is going to compete with the existing MFB where it has just pronounced that the Microfinance banks increase their capital base,” he said.

     

    CBN deepens microfinance

    banking commitment

    The CBN under Godwin Emefiele’s leadership, promised to create people-centred Central Bank, delivering price and financial system stability as well as promoting sustainable economic development.

    “We will collaborate with commercial banks to significantly improve the credit culture in the Nigerian banking system,” Emefiele said in his maiden speech when he assumed office in June 2014.

    It was on this basis that the CBN and the bankers’ committee agreed in December to establish a national Microfinance bank across the 774 local governments, leveraging the Nigerian Postal Service (NIPOST).

    The CBN since then has worked towards increasing access to financial services for the economically active poor in order to enhance job creation and poverty reduction. The target is to increase the share of micro credit as percentage of total credit to at least 20 per cent by 2020.

    Recently, the Bank took some steps, including a thorough review of the subsector, increased surveillance and revocation, where necessary. These measures were intended to revitalise the sector, ensure the institutions to remain mission-focused and grow public confidence in the sub-sector.

    ”In a developing economy like ours the link between microfinance and the real sector is quite strong. Microfinance banks are conceived to serve as critical financial lubricants for the real sector, which is the pillar of sustained economic growth. At the moment economic policy in Nigeria faces a major challenge of reviving growth, which is the (only) sure path to ending pervasive poverty. Microfinance has worked in this regard in many climes and promises to work in Nigeria, if we get it right,” Emefiele said in his keynote address at the workshop.

    Represented by deputy governor, corporate services, Edward Lametek, Emefiele  said the Bank remains committed to the economic empowerment of disadvantaged groups including women and actively seeks to achieve this through the instrumentality of microfinance among other initiatives.

    At the seminar, Emefiele disclosed that an aggregate loans granted by MFBs was N482.896 billion and that loan sizes that are below N 1.4 million accounted for 72 per cent of the total.

    According to him, data from the licensed credit bureaus indicated that micro finance banks operations have helped to improve financial inclusion among smallholder peasant farmers.

    However, the challenges remained inadequate spread in the location of the MFBs in relation to their target beneficiaries, demand for immoveable collaterals for loans, high interest rate, and absence of a credit reporting system.

    “We are committed and working assiduously to address these limitations,” Emefiele said, adding that the Bank in collaboration with other agencies of government is implementing various intervention schemes in addition to promoting microfinance.

    The Bank, he said, has since worked towards increasing access to financial services for the economically active poor in order to enhance job creation and poverty reduction. The target is to increase the share of micro credit as percentage of total credit to at least 20 percent by 2020.

    Earlier in the year, Emefiele noted that as at January 31,2019,628 financial institutions comprising 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies had been registered on the Registry’s portal.

    Speaking at the colloquium on the topic: “Real Sector Credit Delivery: Catalyst for Sustainable Economic Growth”, director, corporate communications department, Isaac Okorafor, expressed happiness that the CBN is working with the bankers’ committee, NIRSAL, and NIPOST to realise the national Microfinance bank project.

    Responding to questions on loan refinancing, he said no refinancing is allowed rather through supply side they will push credit into the sector to bring down interest rate.

    The CBN in collaboration with the bankers committee agreed in December 2018 to establish a National Microfinance Bank using NIPOST outlets in 774 local governments.

    In the National MFB establishment plan, the CBN and the Bankers Committee will utilise the sum of N5 billion as equity from N60 Billion Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS) Fund, while NIPOST will contribute its offices in the 774 local governments.

    However, this was not welcomed by microfinance operators as they opined that the decision runs counterproductive to the salient objectives of the National Microfinance Policy, Regulatory and Supervisory Framework for Nigeria as well as the objectives of the National Financial Inclusion Strategy.

     

    The Microfinance policy

    framework

    According to the CBN, the Microfinance Policy framework is aimed at filling these gaps through a three tiered licensing framework, whereby Microfinance banks have the option of obtaining a Unit, State or National license.

    Also, the primary goal was to achieve a regulatory environment that will ensure the emergence of robust, efficient and sustainable institutions.

    The CBN developed appropriate regulatory policies and measures to ensure long term sustainability of these institutions and their contribution to economic growth and development.

    Some of which include; Legal and Regulatory framework, Prudential Guidelines, Supervisory environment, risk management practices, and other sector related reforms.

     

  • Social outreach in microfinance

    Reactions to my most recently published essay in The Nation, January 2 titled “Still on the Proposed National Microfinance Bank” were fast and furious. Before misconceptions further concretize and speculations run riot, let me hasten to say that all stakeholders – banking regulators, microfinance operators and microfinance investment vehicles – unequivocally share the same basic goal of providing access to financial services at affordable pricing to millions of poor people in order to reduce or alleviate grinding poverty. However, while there is a shared belief in the imperative of the front-burner position of the social mission, they do not all agree on the best way to achieve it.

    There are two contending schools of thought – the poverty lending approach versus the sustainability/financial systems approach. The former focuses on the poorest of the poor/extremely poor (‘poorest of the poor’ according to CGAP classification) and is described as supply-led i.e. a top-down approach. The self-sustainability approach (also known as the financial systems approach) focuses more on the economically active poor and is said to be demand-driven i.e. customer-centric.

    Both approaches are usually compared on the basis of six aspects of microfinance outreach, namely: worth; cost; depth; breadth; length; and scope. Worth is defined by the value the customer attaches to the outreach effort; cost refers to pricing; breadth refers to the degree of diversification of product offerings; depth to the extent to which poor people are served; length refers to the maturity cycle of product offerings; and scope to the size of the outreach programme.

    Poverty lending approach typically lays emphasis on a benefit-cost analysis while the sustainability approach focuses on cost-effectiveness analysis. The most critical measurement index in benefit-cost analysis is depth of outreach while the most critical index in cost-effectiveness analysis is length of outreach (full-cost coverage plus an ample return).

    Not surprisingly, the poverty lending approach measures success by how well the intervention effort fulfils the needs of the greatest number of the poorest in the short-term while the sustainability approach measures success by how well it expands the frontiers of the mainstream economy in the long-term. The pressing need to combine the best aspects of both approaches led to the dual mission concept of microfinance: fulfilling the social mission of providing affordable microfinance services to large numbers of poor people in tandem with recovering the full costs of operations.

    Although microfinance banks have a social mission to escalate access to financial services to the economically active poor, it must be noted that microfinance is not a charity but a business relationship that targets the economically active poor, not the extreme poor that are more appropriately served by the poverty lending approach.

    Rhyne and Rosenberg (1998) succinctly posited that “Every decision to settle for less than full financial viability is of necessity a decision to reduce the number of people who will gain access to financial services in favour of giving a larger benefit to a smaller number.” It was as a result of the understanding that a large-sized outreach depends on easy access to funding sources that made the CBN to launch its Revised Microfinance Policy Framework. But just about a decade later, we are returning full circle to the days of depending on government hand-outs, subsidizing interest rates and capping lending margins – the very same factors that caused past poverty alleviation intervention schemes to crash!

    Government direct intervention in business breeds inefficiencies and corruption. Political chieftains, traditional rulers and tribal warlords tend to compromise the system by influencing who takes a bite at the ‘national cake’ and those for whom the intervention is targeted hardly ever make it past the doors. And no one should underrate the ability of the typical Nigerian – whether literate or not – to ferret out arbitraging opportunities offered by the huge interest rate differentials on subsidised facilities!

    This is not to say that there aren’t cases of regulated microfinance banks that have successfully used the poverty lending approach. However, they are very few and far between and usually require a plethora of special regulations to prop them up. The most notable example is the Grameen Bank (Bangladesh), a NOT-FOR-PROFIT microfinance bank founded in 1983 by Nobel laureate Professor Muhammad Yunus.

    The formation of the National Microfinance Bank signifies the total repudiation of the financial systems approach and adoption of the NON-PROFIT Grameen business model and a solid vote for the poverty lending approach. But while the proposed National Microfinance Bank can accommodate huge losses arising from providing below-market interest rates, existing microfinance banks cannot do same.

    And even if some buoyant microfinance banks are able to remain in business, it can only be for a limited period of time considering the crowding-out effects the National Microfinance Bank would have on the sub sector. There would be a very high customer churn accompanied by huge revenue losses. The operators must drastically peg costs to remain in business and doing so would mean ‘right-sizing’ their staffing and operations, culminating in job and income losses (these would be amplified in our extended family system society).

    Fewer hands would do far more work leading to declining effectiveness, poor corporate governance, heightened customer dissatisfaction, rising incidences of employee frauds and unethical/unprofessional conduct. The long-term effect on the formal microfinance sub sector would be disastrous as more and more persons will be financially excluded and placed at the mercy of shylock moneylenders and other informal microfinance operators.

    The more intriguing aspect is the willingness of commercial banks to take a significant stake in the project. Those among them that had engaged in microfinance activities either through a subsidiary microfinance bank or in-house unit had their fingers severely burnt. They ultimately either sold off or wound down their operations. So why get involved again against the backdrop of past errors and regrets?

    And it isn’t as if they already banks don’t have enough pressing challenges in their plates. The book value of their toxic loan portfolios taken over by the Asset Management Corporation of Nigeria (AMCON) between 2011 and 2013 was a staggering N4.02trillion. But soon after the much-touted cleansing of their Augean stables, the latest NDIC Annual Report indicated that their non-performing loan portfolios had again risen to a whopping N2.36trillion as at the end of 2017! What about the Skye/Polaris Bank saga and the CBN-facilitated takeover of Diamond Bank by Access Bank?

    So, why then are why commercial banks willing to engage in mission creep and forage in a pasture they very clearly don’t have the organisational culture and grasp to thrive in? Wouldn’t it have been much better for the economy in general, and the economically active poor and microfinance operators in particular, if the CBN would adopt the Indian example and superintend the allocation of the same funds to microfinance banks without restrictions and at no cost – as it is planning to do with its project – and watch them joyfully achieve the aspects of microfinance with single digit interest rates?

    The following are some universally held principles of microfinance: Interest rate ceilings damage poor people’s access to financial services as they prevent microfinance operators to recoup their high costs of operations and funds; Government is an enabler, not a direct provider of microfinance services and can best support the sub sector by creating an enabling environment that allows private microfinance institutions to thrive; and donor subsidies should best complement, not compete with private sector capital, by promoting human and institutional capacity building.

    Paradoxically, I actually wish the CBN and the Bankers’ Committee a resounding success for two major reasons. First, all the fears I have enumerated here would then prove to just be much ado about nothing. Second, the international microfinance community would be watching with very keen interest. Since the project is contrary to the universal concept of, and consensus on, modern microfinance, it is tantamount to rediscovering the wheel of microfinance right here in Nigeria – a feat that would be hailed as the ideal model to be replicated in most emerging economies of the world.

     

    • Okoye is an economic /microfinance analyst based in Abuja.

  • Grooming Centre named Africa’s best MfB

    Microfinance rating agency, MicroRate has rated Nigeria’s Grooming Centre as the only Microfinance institution in Africa to make the top institution rating released by the world body.

    MicroRate is the and the only specialised rating agency that is authorised by the Peruvian Superintendent to rate all types of financial institutions and since its inception in 1997, MicroRate has performed more than 1,200 ratings throughout the world, in Latin America and Africa, Asia and Eastern Europe.

    In a statement by MicroRate, Grooming Centre made the A+ rating alongside others from Brazil, Guatemala and Honduras while the B+ rating was awarded to Microfinance institutions from Mexico, Argentina and Brazil.

    According to the statement, “MicroRate is pleased to announce the financial institutions (FI) that obtained the best international grades in institutional rating (MIR) and social rating. The list includes regulated and non-regulated entities.

    In the top social rating, Grooming Centre made the rating but was ahead of Lapo Microfinance in the ranking. The MIR evaluates the overall performance regarding the best practices and sustainability in the long term. “We are also pleased to recognise the effort in the social performance management, which confirms the responsibility of these FI towards their customers, employees, the community and the environment,” the statement said.

    Grooming Centre is a Non-Governmental Organisation (NGO) founded in December 2006, and registered with the Corporate Affairs Commission (CAC) Certificate Number CAC/IT/NO 24198, to address the near absence of financial services to the large population of economically active poor people engaged in small trading and micro productive activities in many parts of Nigeria.

    Grooming Centre is a national institution with an international perspective and is dedicated to mobilising resources and offering financial services to the entrepreneurial poor that have little or no access to conventional forms of financial services.

  • Upu to set up university, microfinance bank

    Urhobo Progress Union (UPU), apex body of the Urhobo, has begun moves to set up a university and a microfinance bank for women.

    Speaking to reporters during a visit to the proposed site for the university at Deghele-Elume in Okpe council, Delta State, UPU President General Chief Moses Taiga urged Urhobo sons and daughters to unite.

    The team had stopped briefly at Professor Sam Oyovbaire’s home at Opuraja, where it met Okpe Leaders of Thought, led by Chief Onomigbo Okpoko and President General of Okpe Chief Robert Onome.

    Establishing the oneness of UPU, he said “there’s never been a division. There’s always been one indivisible UPU since 1931, and it shall remain so. Urhobo shall speak with one voice always.”

    Listing achievements of UPU since he assumed office, he said “achievements are a continuous thing. Trying to set up a university is one of them. We are trying to set up a microfinance bank for our women. We are talking to government about upgrading Urhobo College.

    “We want to upgrade Sapele Trade Centre and the trade centre in Ogor. We have also got the government to approve the study of Urhobo in our primary and secondary schools and the government is going to launch it soon.

    “In a short time, we are achieving a lot of things. Uwiamughe, our cultural centre, is being fenced at the moment, and is going to be improved on as time goes on.”

    Speaking on the tour, Prof. Iboje explained the need to investigate before launching the project.

    “We are here to explore possibilities of taking over the place and then we move forward to start the process of establishing the university.

    “The benefit is if we acquire it, we will establish a university here and those who have not been able to go to university because of distance, this one will be close. If you go to the Southwest, you see so many graduates because there are many universities.

    “That is the benefit we are going to derive from having a university close by, where we don’t need to stress on what it will cost to feed somewhere, get accommodation. If you are close to your home, you can become a graduate,” Iboje said.

    The site, with a structure bearing 42 lecture halls, was formerly established for a polytechnic by the state and is donated by the Okpe to UPU.

  • Body rates microfinance bank best in Africa

    A microfinance bank-Grooming Centre, has been adjudged the best committed outfit to clients’ protection in Africa. The recognition came from the Smart Campaign, a global initiative that incorporates strong client-protection practices into the microfinance industry.

    Grooming Centre, with headquarters in Lagos, was rated the first in Nigeria and sub-Saharan Africa, and the 45th in Africa, Latin America, Eastern Europe and South Asia to have been certified since the rating programme began three years ago.

    “We extend our heartfelt congratulations to Grooming Centre,” said Isabelle Barrès, Director of the Smart Campaign.

    “Their willingness to do the work it takes to prepare for and undergo the intensive process of evaluation is indicative of their deep commitment to their clients. They have shown that this bar is achievable in the area of client protection. Their example will catalyse a movement towards certification within the broader industry.”

    In a statement, the Smart Campaign’s Client Protection Certification programme publicly recognises those institutions providing financial services to low-income households whose standards of care follow set principles.

    “We have always held a strong commitment to protecting our clients, but this independent validation lends credibility and demonstrates to our community and our industry that we continue to work every day to improve our service and our commitment to best practices in microfinance,” said  Godwin Nwabunka, CEO Grooming Centre.

    The Smart Campaign aims to improve client protection in microfinance through better understanding and use of client protection principles by microfinance institutions (MFIs). Certification of MFIs is one of the primary activities of the Campaign.

    The certification programme contains a rigorous set of standards for evaluating institutions by independent, third-party raters licensed by the Smart Campaign. The raters – Planet Rating, M-CRIL, MicroFinanza Rating and MicroRate – are established and specialised microfinance rating agencies with extensive experience, having analysed hundreds of institutions to date.

    “Microfinance emerged in the wake of inability of the formal sector banks to be client-centric and reach the excluded sections of the society. As such, it is important that the focus of micro finance remains on clients. Initiatives like Client Protection Certification ensure that this focus is not diluted,” said Dr. Alok Misra, CEO of M-CRIL, one of the licensed rating agencies.

    Grooming Centre has long demonstrated a commitment to client protection. Prior to undergoing certification, the institution was evaluated by the Smart Campaign on their practices, and contributed to the development of Campaign tools to help advance the sector.

  • Lafarge eyes housing deficit reduction through microfinance academy

    Lafarge Africa Plc, a member of the LafargeHolcim Group, has launched the Lagos State Chapter of its Housing Microfinance Academy, which is to provide capacity building to Microfinance Banks to enhance accessibility of housing credits for the low to middle income segments of the society.

    The move, which is a corporate social responsibility of the group, is aimed at allowing low income earners own homes, reduce the 17 million housing deficits in the country and it is as a result of the success of the pilot scheme of the affordable housing initiative called ‘Lafarge Ile Irorun’ done in Sagamu last year.

    The Chief Executive Officer, Aggregates and Concrete, Lafarge Africa, Mr Loren Zanin said this over the weekend at the launch in Lagos, saying: “the ‘Lafarge Ile Irorun’ (meaning house of comfort), has gone a long way and expanded nationally, adding that it is the reason it is now called ‘Lafarge Easy Home.’ He said in just two years, it has enabled 2,000 families to build their homes, allowing a total of 10,000 Nigerians to become homeowners.

    Zanin said: “Nigeria has from the start been one of the key countries for our affordable housing initiative and what was done in Sagamu, the first housing microfinance programme ever in this country was through the partnership with LAPO Microfinance Bank and the support of the Agence Francaise de Developpment (AFD), that dedicated a five million Euros credit line to LAPO Microfinance for this.”

    On the reason for Lafarge’s involvement, Zanin said the challenge of providing access to housing for low-income earners has special importance within Lafarge Africa Plc, as it sees it not only as a challenge of the times, but also as an opportunity which is fully aligned and central to its strategic objectives.

    “This initiative was launched four years ago in the perimeter of Lafarge group and over the period, Lafarge has developed projects in 18 countries. This initiative is unique as it combines two objectives, which are finding new ways of doing business by serving the low income segment profitably, and making an impact on the housing for millions of people. This is now a business for Lafarge which impacted more than 300,000 people over the last two years, and generated €7,2m EBITDA last year”.

    The Ambassador of France to Nigeria, Mr Denys Gauer said AFD, which is an arm of the French development agency, a public institution in charge of administering aid. It was involved at the pilot scheme because of the importance of the initiative. He said the academy aims to enhance the development of microfinance housing in Nigeria to build houses for the poor which is a major challenge in Nigeria.

     

     

    Speaking at the event, the Country Manager, International Finance Corporation (IFC) in Nigeria, Eme Essien said IFC is in partnership because housing is a major challenge in Nigeria as statistics revealed that there is a housing deficit of about 16.17 million units to close up in the housing sector. He said the sector has to produce over 700,000 units of housing every year but the formal sector is only churning out about 1,000 units a year and the most prolific developers in Nigeria can only churn out about 400 units a year.

    Essen said when compared with developers in Latin America and East Asia that are able to build between 5,000 and 10,000 units a year, there is a real problem in Nigeria when it comes to trying to address the housing challenge.

    Another issue in the housing sector, she said, is that most developers tend to target only the high income segment, but in places such as Mexico, there are prolific developers that are able to churn out units for about $35,000.

    Lafarge Easy Home now has operations in Lagos, Ogun, Oyo, Osun, Ondo, Kwara, Edo and Cross River states, with, close to 200 families becoming clients of the scheme monthly.

    Head, Central Bank of Nigeria (CBN’s) National Housing Fund Programme (NHFP), Mr Adedeji Adesemoye said the CBN is in the scheme because it aligns with the agenda of the NHFP and will provide housing to members of the  lower strata of the economy.

    Asesemoye said CBN is the project implementing entity of the NHFP and it is supported by the World Bank in collaboration with the Federal Government, Federal Ministry of Finance, the Ministry of Lands and Housing and the state governments as states have the larger parts of the lands.

  • Microfinance Bank gives scholarship

    A total of 611 pupils and students attending public and private secondary and tertiary institutions have been awarded scholarships by the LAPO Microfinance bank.

    A breakdown showed that students in tertiary institutions got N100,000; those in privately-owned secondary schools were awarded N80,000, while N28,000 and N35,000 were awarded to pupils of public secondary schools.

    Chairperson of the LAPO Scholarship Board, Prof Christiana Okojie, however warned parents against diverting the scholarship fund to private businesses.

    Prof Okojie disclosed that investigations showed that parents of previous awardees did not use the fund to pay the children’s school fees but rather diverted funds for other uses.

    Okojie shocked parents present when she said that the cheques would not be issued in their names but in the name of the schools attended by the beneficiaries.

    She said over 5,600 students have benefitted from the scheme since it started in 2006 from the award of $10,000 by the Managing Director of LAPO Micro Finance bank, Dr. Godwin Ehogiamusoe.

    She said: “We were told that many parents did not pay fees. We have decided to stop giving cheques. You are supposed to pay the school fees first. This scholarship is to help the children. We want your children to do well. Godwin made sacrifice to establish scholarship.  Those beneficiaries in the university played some tricks. We heard one of them travelled abroad. Don’t misuse this opportunity.”

    Prof Okojie also counseled the parents to monitor their wards’ academics, warning that the scholarship would be withdrawn if they perform poorly.

    “We will withdraw scholarship of those not doing well in school.  Tell your children to do well. Those that benefitted are not doing well in school. We are not happy with those we have given scholarship especially at the secondary school level. Tell your children to read their books,” she said.

    Dr. Ehigiamusoe on his part said the scholarship was part of LAPO Microfinance Corporate Social Responsibility to the society.

    He said the purpose was to celebrate children of the bank’s clients.

    “It is a cashless process. We identified the challenged in our environment. We are doing things that will promote the environment and give social empowerment to our clients,” he said.

    Ehigiamusoe said skill acquisition has been introduced to bridge the gap between those in school and others not able to make it.

     

  • ‘Deposits safe with microfinance banks’

    ‘Deposits safe with microfinance banks’

    Managing Director, Sovereign Microfinance Bank,  Sunday Akintola, speaks with Bukola Afolabi on his life, business and the operations of MFBs in Nigeria

    What does it take to succeed in this kind of industry?

    Before I ventured into banking, I had been into telecommunication business, i.e. distribution of recharge cards. I used to be a dealer, I happened to be one of the best ten dealers. The business was quite profitable as at that time, which made people to start getting attracted to it. I diversified into another business when I realised the business was no longer what it used to be – products were sold at reduced prices, thereby causing dealers to run into debt. I delved into banking and created Sovereign Microfinance Bank, which was based on my vast knowledge and experience in the banking industry. I had spent over 11 years working with Zenith Bank.

    When was the business established, and what are the challenges so far?

    Sovereign Microfinance Bank was established in 2009. Microfinance banks in Nigeria face enormous challenges such as infrastructural inadequacies, social misconception, poor legal and regulatory framework, unbridled competition from other financial institutions, and abandonment of core microfinance function and paucity of qualified manpower. When we had the tsunami in 2010, whereby 288 microfinance banks were closed because of inadequate rendering of returns to the CBN; we were part of the 288, but it was not that we were not OK but because we did not render our returns. We were also having a lot of debt portfolio because people were not paying back our money; so after a lot of plea, the CBN reasoned with us and returned our licence along with some others. Another area of challenge is that many Nigerians are not too comfortable with giving microfinance banks deposits. Most of the deposits we have in Sovereign Microfinance Bank are from friends and relatives. I want to use this medium to assure Nigerians that their money is safe with any microfinance bank because all of us are under serious supervision of the Central Bank of Nigeria (CBN).

    What is your typical profit at the end of the year?

    In our last financial year, we made N24 million; and that was the first time we made profit. To be precise, we broke even in August, 2013. This year we are hoping to hit N100 million because we have already seen what is on ground, even though we are in the middle of the year. Microfinance bank is one of the best things that have happened to our economy. CBN too got it wrong at the initial stage, but now I give kudos to them for their supervisory role. Not only supervision, they have given us a lot of training on microfinance banking and this has helped many MFBs to grow. What I will tell them is that they should give us more support. We still want them to understand the way we are doing our work so that it can be better. In Mushin where our office is located, we have empowered so many people. It is here that I know that N50,000 can make an impact on someone’s life.  People will come and borrow N50,000 and before you know it, they will come back and tell you what they’ve done with the money and even have proof to show after paying back the principal and interest.

    What was your initial capital and what is your bank worth at the moment?

    Our initial capital was N20 million and was later increased to N100 million paid up capital last year. That is what we have now; but by June it’s going to go up because we are hoping to get a state licence. We are planning to get out of Mushin and replicate what we are doing in other areas of Lagos State, so that Nigerians can enjoy our services.

    What’s your management style and how well has it worked for you?

    My management style is open-door policy. Firstly, as MD, many people want to be your friend, even though they may not genuinely love you. Some staff just want to gossip, so what I do usually is call both parties and resolve whatever the issues are. This has discouraged several others who probably had the same intention. We try to create an atmosphere of love and mind you this is a microfinance bank, and the foundation we lay now is what will take the bank to greater heights. I got this style from my time at Zenith Bank.

    Tell us about your Zenith Bank experience

    I joined Zenith Bank in1993, just three years after the bank was established; but the structure the founder, Mr. Jim Ovia, put on ground amused me a lot. By the first week of February, he would give us our housing allowance upfront; by August – because June is Zenith Bank year end, the bank would give us our profit share. It used to be about 10 per cent of the bank’s profit. The profit shared was so much that time, that you could use it to achieve great things for yourself. And by November, he would give us 13th, 14th and 15th month salaries as Christmas bonus. All these incentives helped serious staff to have savings and also start planning for their future. These are what I saw and apply as my management style.

    In Sovereign Microfinance Bank, we pay Christmas bonus and profit sharing, too. Those are the things that we are doing here that are making things to be easy for us. We also encourage our staff to further their studies because 60% of our staff are OND holders.

    And how have the staff responded?

    They’ve responded with hard-work and loyalty. I have never had any cause to panic about the event at home anytime I travel, whether within or outside the country, because every staff is disciplined and dedicated to the job. Their loyalty is unquestionable; I want to use this avenue to address employers that question the loyalty of their staff to be caring. The way to get the best out of the staff is by empowering them and not enjoying the benefit of the company alone. Honesty and loyalty are the key things that can guaranty the success of an organisation, and that has been the pillar behind our prosperity at Sovereign Microfinance Bank since its inception five years ago.

    Working with a staff that is made of 70% ladies can sometimes be challenging, how do you cope?

    (Smiles) I started off as a primary school teacher between 1989-1993, and during this time first to third positions went to the girls and with the way the society is currently, the ladies are more focused and serious because they have to secure their future by themselves, and the reasons why they are mostly employed in banks is because they are not excessively driven by greed and most time their income is mostly spent on material things like jewelleries. Men are too ambitious and they are excessively driven by greed. Secondly, some customers prefer ladies as their account officers, not that banks employ ladies for customers to take advantage of them, as is wrongly assumed. So I see ladies as efficient and effective.

    What is your typical day like?

    The nature of my day depends on my schedule for the day. Sometimes, I am less busy and there is really not much to do except the daily routine of work; while there are days when I will be very busy with our customers, walking in and out of the bank. There are also days when I will travel out of Lagos and return the same day all because of the nature of my business. And once I close from work, it’s off to my home straight.

    What attracts you to people?

    I love people who are serious with their work. I also love people who are professional. If I see that you are a professional, I can go to any length to assist you. There is one lady in one of our commercial banks, every morning she will send us our account statements, and also call to confirm if we have received the messages sent to our e-mails. I see that person as a serious staff, and there was a day I was opportune to be with her Regional Head and I mentioned her name, I told him that she is one of their best staff.

    How do you relax?

    I love travelling. I travel a lot both within and outside. I rarely spend my weekends in Lagos because it’s too congested. I go out because I have a few friends outside Lagos that I always stay with. I travel around because I know that by travelling you will get a lot of experience and learn one or two things.

  • CBN, NDIC to inspect microfinance banks quarterly

    CBN, NDIC to inspect microfinance banks quarterly

    The Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) will, henceforth, look into the books of microfinance banks (MfBs) to ascertain their state of health.
    It is to check the lenders’ stress level, clean up of delinquent loans and reorganise their balance sheets to forestall unwholesome practices that resulted in the liquidation of many MfBs in the past.
    Last February, the CBN announced the revocation of licences of 83 MfBs. The closure of the institutions, according to the apex bank, took effect from December 20, last year. In view of the closure, the NDIC was appointed the provisional liquidator for their winding up.
    The NDIC has begun the process of winding up of the affairs of the affected MfBs. Findings showed that the inability of the firms to recapitalise was responsible for their closure.
    The apex bank gave MfBs up to December 31, last year, to recapitalise or be liquidated. Its Director, Other Financial Institutions, O.A. Fabamwo, said it was exigent to remind directors and shareholders of all MfBs that the deadline is sacrosanct.
    He, however, advised the banks to conduct due diligence and seek professional legal and financial advice. He also reminded directors and shareholders of all MfBs on the deadline to ensure compliance with the Revised Microfinance Policy Framework, particularly in respect of the capital requirements for each category of MfB and existing branches/cash centres, among others.
    Already, the CBN and other stakeholders have been carrying out intensive sensitisation of the subsector, educating operators on risk management and corporate governance principles.
    The CBN, which several months ago asked the MFBs to recapitalise, had categorised them under different amounts of capital base requirement. A unit MfB bank is authorised to operate in one location without branches/cash centres, and is required to have a minimum paid up capital of N20 million, while that of a state is expected to have a minimum paid up capital of N100 million. It is equally allowed to open branches within the same state or the Federal Capital Territory (FCT).
    But the national MfB is authorised to operate in more than one state, including the Federal Capital Territory (FCT). It is required to have a minimum paid up capital of N2 billion and is allowed to open branches in all states of the federation and the FCT, although subject to prior written approval by the CBN.
    Many of the MfBs being liquidated by the NDIC ran into trouble when many of their debtors refused to pay back their loans, over 80 per cent of which were unsecured. Besides, some of the MfBs were taking excessive risks, and branching out too quickly without considering resources at their disposal and whether utilised funds were short or long term obligations.

  • Woman allegedly dupes microfinance bank of N1.5m

    Amiddle aged woman, Rosemary Izuakor, has been arraigned before a Yaba Magistrates’ Court, Lagos, for allegedly duping a Micro Finance Bank (Mfb) of N1.5 million.

    Izuakor, a resident of 15A, Aliwo Street, Dopemu, who was a loan beneficiary, is facing a three count-charge of obtaining under false pretence and stealing, to which she pleaded not guilty.

    Prosecuting Inspector Chris Takim, said the alleged offence was committed on October 22, last year. He said the defendant had applied for a loan at Susu Micro finance bank located at 34, Commercial Avenue, Sabo, Yaba.

    Takim said: “She provided forged documents indicating ownership of an unregistered Toyota Hummer SUV, with chassis 4t37f13921u322734, which she submitted as collateral.

    “Izuakor submitted to the bank forged documents indicating ownership of an unregistered SUV. The defendant took pictures of the car and presented them as hers along with other forged documents.

    “After submitting these documents, the bank granted her request and she collected N1.5 million from the bank

    “So, when she failed to pay back the loan as agreed, the bank moved to recover the SUV but discovered the defendant was not the genuine owner.”

    The alleged offence, Takim said, contravened Sections 278 (2) and 285 of the Criminal Laws of Lagos, 2011.

    She was granted bail in N500, 000 with two sureties each in like sum by Magistrate S.K. Matepo. The Magistrate adjourned the case to May 6 for mention.

    Similarly, a 57 year old woman was arraigned before Magistrate P.A. Ojo, of a Yaba Magistrates’ Court for allegedly stealing N1,175, 000 from two offices.

    Folake Philips, a resident of 12, Yeni Awosika close, Yaba, was alleged to have burgled two offices where she stole the said sum. She is facing a four count-charge of conspiracy, burglary and stealing, to which she pleaded not guilty.

    Prosecuting Assistant Superintendent of Police, Felix Ifijen, told the court that the offence was committed on March 26, at about 3:45pm, at 231, Herbert Macaulay Way, Yaba.

    Ifijen said: “The defendant employed thugs to break down the door of two offices belonging to Mr Mudashiru Sanusi and Mr Remi Oyewunmi, and stole N1, 175,000 from both offices.

    “She had broken the shops on ground that the property was her inheritance and she wanted to forcefully take ownership. The defendant removed the doors and burgled the offices taking away N1,175,000 in cash and a laptop valued at N150,000.”

    According to Ifijen, the alleged offence contravened Sections 285,307,328 and 409 of the Criminal Laws of Lagos, 2011.

    Ojo granted the accused bail in the sum of N500, 000 with two sureties each in like sum. He adjourned the case to May 15 for trial.