The Executive Secretary, Lagos State Employment Trust Fund, Mr. Akintunde Oyebode, in this chat with MUYIWA LUCAS, says the government’s purpose for the scheme is gradually coming to fruition.
The Lagos State Employment Trust Fund (LSETF)appears good. But people say it is difficult to access. Why is this so? Is there no way to access the fund?
First, if I will be honest, the state has limited resources. This means that the most resilient applicants will scale through because we cannot support everyone. What we are committed to is that the process is transparent and unbiased.
The point is, whatever pain Mr. A is going through to apply, Mr. B is also going through same. There is no preferential treatment for anybody. But from next year the process will be better structured because there will now be windows. What we have done this year is because there is a need to immediately roll out the scheme and reach out to as many people as possible. The loan is on a rolling basis, so every month we are approving applications. Going forward, we will be having windows- the application will close on a certain day and if you don’t apply then, it means you can’t apply for that quarter. But in terms of the requirements, it won’t change. We feel that we are lending without collateral and people must also meet at a certain level. This is not a grant.
Is there any mechanism to monitor beneficiaries of your loans?
Yes. We do some monitoring and we work with partner banks. It is a combination of both microfinance and commercial banks; so they do a lot of collections on our behalf and the monitoring. We also have partners, who from time to time go out on our behalf to monitor the business performance. So, we monitor in two ways- we do our own independently and then we have our bank partners, who help us collect and monitor.
If someone takes N5million and pays back successfully, is it possible for him to get N10million?
No. We have a regulatory limit. The best the person can do is come back for the same N5million, but where we really want to take business to is that we give a N100, 000, you pay back, we give you half a million, you pay back, we raise it to a million and, ultimately, to N5milion. Now for business that needs more, we now structure an introduction when we say for example, we send them to institutions like the Bank of Industry. We have limited resources and to reach many people that is why we peg it at N5m.
There is the belief that the scheme is for All Progressive Congress (APC) members only. How true is this?
To be honest people saying that are only mischievous. That kind of comments does not bother me again. Anyone, who has been through our process, will recognise that this is not based on party, religious, or ethnic affiliations. So, it is a straight forward process and there is a marking scheme- you either pass or you don’t. After that there are some requirements you have to meet. When people say that I always tell them that but you have not even tested the process. You are doing yourself some bad if you sit at home and assume that it is for political affiliations. I have been to 20 local governments and I have said it on radio, press interviews and the likes, and we say to you come and test the process if is different from what we said then go and embarrass us. We have a whistle blower hotline that is managed by KPMG.
If you look at the ratio of beneficiaries there are Igbo, Yoruba and some Hausa and Southsouth and if you look at our team, we don’t care where you are from as long as you are competent and live in Lagos. There is no Yoruba, Igbo, Hausa or party agenda, but of course, there will always be doubting Thomases.
How long have you run the scheme? I mean a kind of appraisal? Please tell the whole world how far you have gone?
As we speak, we wrote our first loan in January-February; from October we will be commissioning an independent inter assessments exercise for an independent body to come and say this is where people you helped are; before you come and this is where they are now; this is the impact we have seen on the programme; these are things we think you can do differently.
So, we expect that by next quarter of next year we should have that report ready. It will also be useful because assessing the impact is what helps us to identify what we need to change. So, we are starting the exercise this year and we hope by first quarter of next year it will be ready for independent opinion, review and critics.
How good is the repayment?
Impressive. If we get similar or better repayment compare to banks, it will be a success because that will mean that we are lending to the right people. In terms of our loses today or what I will call our credit loses, it is still under 10 percent- it is about 5.5 per cent, which is pretty low. But we are not resting on that, we have to continue ensuring that we find the right people and we also drive out how we can collect from those people. One of the issues we face is that of willingness than ability and so, knowing that when they borrow they will be willing to repay and able to repay, that’s what it takes.
So, it is finding those kind of people and ensuring that when they are unwilling, you have the collection mechanism tighten around them to show them that you can collect adequately. But for some people, who are defaulting on their loan now, some will be taken a set up on them, some will be charged to court to show an example that when you borrow from us, it is not a jamboree money because if you take a loan from us and you don’t repay, others will feel like why should they pay. So, we want to show people that there is a consequence for not repaying our loans, despite the low defaults rate.
Of all Lagos State programmes, I think this particular one needs to be shown to the world because it has a kind of direct impact on the people. What do you think?
That is it, and I think that is what we say with governance. One of the challenges is how does government impact the people. So, in some instances, when you can take much longer you will be able to see that in some cases like ours, if done correctly, you can see the impact in one to three years period. So, the government ‘s aim and the governor’s view is, the only way the government is not going to employ all those people coming out from university and secondary schools, who wont even be employed by even the large corporate, but primarily the small and medium size enterprises. Apart from the impact on the borrower, there is also the added impact of being able to create more jobs and employ more people.
So far, how many have benefited from your scheme and what is the interest rate being charged?
The interest rate is five per cent per year. In terms of numbers of people, we have approved loans to approximately 6,500 people, but the actual disbursed loan will be around 4,200 people . So, today 4,200 people have actually received their loans and put them into their businesses
Do you have an insurance scheme for the loan?
There is nowhere you can get a 100 per cent repayment on loan in Nigeria or anywhere in the world. Nobody also assure credit risk, the insurance you get is on personal life, fire, burglary and theft or the person dies or permanent disability and he is unable to run the business.
We insure against that; we insure against theft, burglary or property and the equipment. We do that type of insurance. We have some insurance that if something happens to you or the business premises, we will be able to recover money and we also give you the option to increase it if you want. So, if you want to increase the sum insured, that is up to you. But what we insure is up to the loan we give to you, anything in excess of that is now between you and the insurer, but the real point is and I think I have made that clear, what determines success or failure is the selection process. So, if you introduce nepotism and sentiment in selecting people you have a higher rate of losing money because that information have a way of going out. People will know that if you bribe someone with N50,000 you will get the loan so if you pay someone that amount to get a loan, why will you pay back?
By the time you complete the first year, how many people do you hope to have empowered?
That is tricky to say. At this stage, we have done 6,000 loans maybe it will have gotten to 10,000-12,000 and this is not all we are doing. It is not just lending, the loan programme is just one of several programmes. We are doing some work with the UNDP at the moment where we are providing technical and vocational training to approximately to 16,000 people over the next two years and we are not providing the training for the sake of just training, but to at least, make sure 75 per cent of those people are placed in jobs.
So, when you are through with the programme we place you on jobs. We are already talking to private sector employers to ask what are their needs, what skills do you need and what kind of professional level do you need? This is because when we train those people to that standard, they will automatically employ them. That is a completely different programme, that is not a loan programme, but an employee programme where another 16,000 people should be put to work over next two years.
So, it is not a one-sided programme. And if you look at all the work going on around Yaba today, the eco-system is developing on its own without the government support, this is where the Kongas, the Jumia, Iroroko, and others have come out from- excellent business not only employing hundreds of people, but creating a platform for thousands of people to do their business.
Just a passing short, you give loan without collateral? How do you secure them?
You know the interesting thing is your first level of security is the quality of the person you are. If you give me a house today to collaterise your loan, how long do you think it will take me to recover the loan? If that loan goes bad how long do you think it will take to recover it? So, with our current state, we are in court for minimum of four years. Collaterals do not give you confidence. Collateral is only important at the point when the person has failed to pay. If you able to pick the right borrower, you don’t even need collaterals but one of the things we have done is that we will use social collateral. So, we ask these people to provide us with guarantors, who we can hold in the event if they don’t pay. We also have a right of setoff such that if they don’t pay we can use their BVN to check when they have money and set it up against their balances. Of course, that is the last resort position because to set it up we need a garnishee order, but we have that ability.
