NAMB National President, Yusuf Gyallesu Speaks with Business Echo Publisher, Olushola Okunlade
The growth of microfinance banks in Nigeria is phenomenal with over 800 licensed institutions mostly operating in urban and rural areas. Though some microfinance banks have come and gone, there are still some vibrant ones providing services to their clients. Where is the strength of this industry in Nigeria?
Olushola Okunlade in an exclusive interview with Yusuf Gyallesu, the President, National Association of Microfinance Banks (NAMB), highlighted the challenges, opportunities and government’s role in this industry.
How would you rate the Microfinance industry performance, in terms of its financial interventions in the Micro, Small and Medium Enterprises (MSMEs) sub-sector of the economy?
Well, thank you very much for this question. Microfinance Banking has fared well in the last few years despite the challenges that stared its face.
You know prior to this time most banks were not digitalized, but with the advent of technology, which brought in BVN and other technologies, most banks have measured up. They are effectively rendering services to customers even at the grassroots. Therefore, I think there is great development, and great achievement for us. Lets not forget that technology evolves every times, so, we keep to the times.
What are the challenges?
The major challenge in this Microfinance Banking sub-sector, naturally, is funding. Liquidity is not always there, and you know we service the MSMEs, which is the engine room of any economy in the world. Therefore, we feel we don’t have the required funds and liquidity to service them effectively, which could help these MSMEs to contribute effectively to the economy.
Meanwhile, sourcing deposits and raising funds into Microfinance industry is very expensive, this is why our interest rate is usually high when we give out loans.
Similarly, we are different from the Commercial banks where everyone who has surplus money goes there to deposit.
There is this misconception about our industry; many people think that Microfinance Banks are just there to give out loans. This is a layman’s belief. We don’t just give out loans like that. You must attract the savings anddeposits first, so from there you can now start to give out loans.
Actually, we found out that some of our customers take loan from us and deposit it with Commercial banks i.e the Deposit Money Banks (DMBs). These people put it (the fund)either in savings or fixed deposits with the Commercial banks, but when they are looking for loan they don’t go there, they come to microfinance banks. The question is where are we going to get the funds to give them?
But the ideal thing is that they should bring their deposits to us too, so that we can give othersloans from that deposit.
What is CBN doing concerning this?
CBN cannot do anything about this because it is a free market. This issue is affecting the entire microfinance banks in the country. What we want is that people with excess funds without immediate need for use should bring it to us for saving in whatever form; either as fixed deposits or ordinary savings. Then people having businesses requiring funding can come to us to take loans from the money deposited by these people. That is what banking is all about.
Furthermore, CBN expects that if we float our private businesses as banks we should be able to source for deposits from the public and at the same time find channels to give out loans to people.
So, CBN cannot intervene in this. However, there was a time when N220billion was set aside to fund MSMEs in the country. This fund was meant to be accessed by Commercial banks, Microfinance banks and even state governments.State governments could access up to N2billion from this MSME Fund.
However, for us to access this money and lend to our customers, the terms and conditions set by Central Bank of Nigeria (CBN) were so stringent that we were unable to access it.
As I am talking to you now, less than 5% of the N220billion has been accessed by the Microfinance sub-sector because of the strict conditions that were set. We have been talking and advocating for CBN to relax these conditions so that we can access the money and lend to our customersthat the money is meant for.
There have been consistent clamor by the NAMB for a level playing ground for operators, Could you shed light on what you really mean by this?
You see, sometimes in 2018 or thereabout, CBN came out with an idea of establishing a National Microfinance Bank, while already we had nine (9) licensed National Microfinance Banks.
So, we said if government is floating a bank, then frankly speaking, there won’t be that fair level –playing ground.
By our understanding, government has no business in doing business. The government’s responsibility is to provide an enabling environment for all stakeholders and players to do their businesses.
However, when we learnt of their intentions we wrote a letter to CBN to express our fears. But we later gathered that they have succeeded in floating the Microfinance bank.
But how can a regulator become an operator? Who will regulate that regulator? We complained, hoping that they will reason with us in what we were talking about. Rather, we were told that it was the Bankers’ Committee that floated the bank.
But who are members of the Bankers’ Committee?
These are the Managing Directors of the Deposit Money banks with the CBN Governor as the chairman.The Microfinance banks are not represented on that Committee at all.No wonder, most of the key staff of the new bank were seconded from CBN.
How do you reconcile that?
The newly floatednationalMicrofinance bankis partnering with NIPOST and is expectedto have branches in all the 774 Local Government Areasof the country.
We saw the whole idea as an emergence of a government bank to compete with privately owned banks. Like I said before, government has no business in doing business.If it were a private body floating that national bank we wouldn’t have any fears at all.
Now they call it NIRSAL Microfinance Bank which is also a member of our association. With this, we now have 10 licensed National Microfinance banks.
Our fear was proven, when the government brought out palliative of N50b. The whole amount was given to that one bank leaving out the other 873 licensed Microfinance Banks. That confirmed our earlier fears because this is government’s money, it is a post Covid-19 intervention meant to support every person and business in the country that was affected by the pandemic.
They know that they own a bank, so the whole amount was given to their ownmicrofinance bank.
Don’t forget that this bank was established barely three years ago. Furthermore, the experience, professional training and certification most of us have their staff don’t have. The Managing Director and other top Management team were from CBN. So westill see it as a government owned bank.
Do they have the reach and branch network to disburse N50billion across the country?
They don’t have. They are new and lack the required microfinance banking experience to effectively disburse and efficiently manage such funds.
We feel that they are overwhelmed by this huge amount to manage. There is no way they can effectively and efficiently handle this intervention money. So, what weafearis that there could be a serious problem in the implementation of the government support to the people.
Also, in reference is the Anchor-borrowers’ fund where the same government brought out money to assist the rice farmers. The Microfinance banks that are there dealing with farmers at the rural communities were not involved in the scheme at all. They channeled the funds through the Deposit Money Banks and that is the story now. There is a very high percentage of default in this scheme.
Obviously, the idea is that any time the government has anyintervention money for the poor people; they prefer to give it out directly throughother channels without involving the microfinance banks who are closest to these people at the local community levels. For instance, if this N50billion intervention had been given to some of the sound Microfinance banks scattered across the country, the effect would have been excellent. Also, the money would have been relatively safe as the microfinance banks would take it as loans for on-lending under some terms and conditions.
So the government would not be worried because they are dealing directly with licensed banks that would ensure full recovery of the funds.The microfinance banks will disburse and ensure they follow due diligence and apply strict credit risk management on whoever they are disbursing the money to. But the way they are disbursing through NIRSAL Microfinance bank who the people see as a government bank, will not yield the desired result. Most beneficiaries will see it as a grant and or national cake that do not need to be repaid. We fear that they cannot effectively monitor the beneficiaries to ensure that they are putting the money to use and to ensure recovery.I am not a prophet of doom, but I can assure you that at the end of the day the level of default would be high.
So,what we are advocating to Central Bank of Nigeria is that, since this N50b has not been completely exhausted, other sound microfinance banks should be involved with the disbursement of this palliative.
We are partners in progress and also stakeholders in the financial system and would want the government to succeed in its policies that affect the poor population at the grassroots levels,
What are the initiatives you intend to set up to pilot NAMB forward during your tenure?
Am sure you are aware that I was part of the last regime in the capacity of the First National Vice President.I worked hand in hand with the then President todevelop sound programs for the association.
Therefore, for continuity, wehave to implement uncompleted programs of the last regime and then introduce new onesfor development and progress of the association and its members. I hope that whoever is succeeding me after my tenure next year will equally continue with my uncompleted programs like that..
Ours is a professional association and we ensure that at any given time the leadership will always have programs that will protect the interest of the members and uplift the statusof the body and sector as a whole.
But to answer you, one major campaign promise we made was a commitment toensure that we have sound, functional and compliant Microfinance banks in the country.
We are also conducting membership verification across the country to establish and determine the actual numbers of our members that are functionally active and those that are not. This will assist us in planning for effective membership services and budgeting. We discovered that payment of annual dues and other financial obligations by members are not adequate compared to the number of 874 licensed banks.Also, attendance to any official function of the association is always very poor. You will find that the attendance to functions and payment of annual dues usually hovers around 400 out of the 874 registered banks. So, what is happening to the other 400 members?
We know for sure that most of these remaining 400 members are just members on paper as they only have the license from Central Bank Nigeria to render services to the public but are not doing due to one reason or the other. Some may be facing someserious challenges affecting their operations while some have willingly closed shop and refused to surrender their licenses back to Central Bank of Nigeria. These banks are still being regarded as active members. So we are trying to reach out to all our members to ensure that we have the correct figures so that CBN will know that out of the 874 only 500 or soare actively doing the business.But each time we interact with CBNit keeps making reference to 874 as our membership strength. This figure actually distorts our compliance levels with the regulators.
We are therefore, conducting an online membership census which will later be validated by on sight physical visits.
There are 4 functional administrative levels in the NAMB structure, comprising of the Board of Trustees, the National Working Committee, the Zonal and State Chapters. These levels are necessary to ensure effective and efficient administration and delivery of services to the members.
We ensure that every state and zonal chapter holds regular meetings,as dictated by the constitution, where they discuss issues affecting the association and the sector in general. The chapters periodically update the national secretariat with their actual membership strengths.
It is from these chapters that the payments of dues are being coordinated.
How is NAMB’s collaboration with the Nigerian Exchange Limited (“NGX” or “The Exchange”). How will this impact on MFBs?
Actually, in 2019 I was part of a team that went to the Stock Exchange for a collaborative engagement. We had a very fruitful discussion where we saw the need for the association to collaborate with them. We saw this as an avenue where our members could raise the required funds to meet up with the new minimum capital requirement.
Most of our members will not be able to raise funds from the private sources, So we saw the need to approach the Stock Exchange.
We also went round the geopolitical zones of the country on sensitization and creating awareness to all the stakeholders on the various investments and funding options available for us. This is a continuous exercise until funding and liquidity is stable in our sector.
NAMB plans to float a Microfinance Development Company to serve as a Special Purpose Vehicle (SPV) for funding the microfinance sub-sector. Have you been able to achieve this?
Yes, this company is a child of necessity. Like I told you from the beginning of this interview the major challenge we have in this sub-sector is funding. We saw that we are not actually being able to generate enough deposits to enable us offer our normal banking services, and getting funds straight from the government with all these stringent conditions is not forthcoming.
Also, individual microfinance banks will not be able to meet the requirements set by these government agencies. Therefore, we resolved that as an association we should float a company that will be responsible for accessing funds either locally or internationally, for on-lending to our members. That company has been floated and it commenced operations since October last year and is wholly owned by Microfinance banks.
We have clear and simple modalities and requirements on how to invest and access funds on that platform. A lot of our members have seen the wisdom in floating this company because, if nobody wants to give us funds, why can’t we raise it ourselves?That was why we as an association formed that company.
As NAMB President, what were your experiences during COVID-19 pandemic?
COVID-19 Pandemichas come and is still very much around. It is being experienced by everyone as it has affected all spheres of life, not only here, but all over the world.
All our members have been affected negatively as movements were restricted forcing businesses to completely shut down. We could not render services to our customers and at the same time could not recover our loans that fell due for repayment. –
But for us as the umbrella body of all the Microfinance banks what we are doing is advocating with Central Bank of Nigeria to allow our banks to reschedule and extend the loans tenors for most of our customers who were unable to repay as and when due.Because during this Covid-19 period most our customers couldn’t do anything, they were struggling to survive and stay alive not to talk of doing business torepay their loans.. So we are appealing to our members to be soft on their customersby givingthem some moratorium and extend the re-payment periods. Let them give the customers time to come back to their businesses.
So this is what the association is advocating to our members.
How would you rate the performance of your Microfinance Bank in terms of deposit base, core banking services and expansion trajectory?
Well, with regardsto the microfinance bank where I am the Board chairman, even though we have just taken over the bank, we are still trying to re-engineer the bank so that, being the President’s bank, whatever requirement is expected of a Microfinance bank we should be able to have. We are hoping tomeet the new minimum capital requirement before the dateline.
The bank is already on the NAMBUIT platform that CBN is mandating all microfinance banks to key into, even though the association is advocating that it should not be by compulsion. Banks should be allowed tomake a business decision in selecting their preferred IT platforms.
We are doing everything possible as an association to see that this IT platform works, so that our members who do not have robust banking software can key in and do their banking business.
Therefore, we are trying as a bank to measure up and ensure that with the available resources we are able to meet up with all the requirements expected of any microfinance bank.
What roles do you think this bank will play in leveraging your members’ operations and by implication, stabilizing the MBF sub-sector?
JOSAD MFB is just one of the 874 licensed microfinance banks operating in the country. We are located in Karu, Nassarawa state. I believe there are lots of commercial activities there.it is a virgin market and we will do our best to take advantage of the potentials that abound and may be in about 2 or 3 years’ time it will be a success story.
What is your reaction on CBN’s new 60% Loan Deposit Ratio (LDR) policy for banks?
To me, what they mean is whatever amount of deposits you have, at least 60% of it must go out for loan disbursements. If you understand what that means, for me it is okay.
However, getting the deposits is the problem. Like I told you earlier, in banking whatever deposits you are able to mobilize, youmust channel such fundst to loans. It is your working capital which you have sourced at a cost. If you mobilize deposits at a cost and you don’t use it to give out loans,then you are failing as a bank. You must give out loans in order to generate enough income to recover your costs and make some profits.
So the 60% ratio they are putting is reasonable and okay.
Central Bank of Nigeria (CBN) is responsible for formulating policies and guidelines to regulate and control the banking system. It is their duty to continuously be changing the policies so that they suit the economic agenda of the government at any particular time.
How is NAMB members handling clients and what are the guidelines NAMB has put in place to ease clients’ loan facility during pandemic?
It is Central Bank of Nigeria (CBN) that comes up with policies to guide the banking activities in the country; while our duty as an association is to ensure that our members adhere and comply with the policies and regulations.
Where do you see NAMB in five years?
In five years’ time, I see NAMB as a self-regulating association with little or no interference from CBN except on policy matters. I see a very close collaboration with all relevant stakeholders to ensure vibrant and sustainable banks in the sector
In fact, self-regulation is one of the 5 cardinal pillars of our association. To actualize this, we embarked on a study tour to Ghana where their rural banking is being self-regulated. We have also been on study tour to Germany and Luxembourg to understudy the international best practices in microfinance banking. Microfinance banking is being practiced in Germany in the form of Cooperatives and Savings Societies for over 200 years.
To achieve this self-regulation, we have to embark on serious sensitization and capacity development of our sector to regain the lost confidence of the general public and our regulators. We must clean and put our house in order to restore our good reputation.
If we are able to achieve this, we can then honestly do our business with very minimal regulation from the authorities. It is only then that you will see real development in microfinance banking sector.
Access Bank Unveils Twice Bitten Campaign
Access Bank Plc, one of the topmost banks in Nigeria has unveiled a new creative slogan to drive its marketing, Twice Bitten Campaign
Twice Bitten? But not today, Block Your Account quickly. These statements decode a lot for Access Bank customers to understand what the bank is really communicating to them.
Online banking has really made financial transactions very convenient in Nigeria and across the globe. But the setback is the fraudsters operating online.
This has given lots of banks a headache. Access Bank really cares about its customers. This crusade brought about this campaign, Twice Bitten, But not today, Block your account quickly.
It is to also alert Access Bank customers on what to do whenever they are in this situation, perhaps, your account has been hacked. Maybe you lost your ATM. Maybe the customer’s ATM was stolen etc.
Twice Bitten? But not today, Block Your Account quickly campaigns guides you on what to do abruptly.
However, this crusade was unveiled three days ago. And it has quickly gained ground in the South West of Nigeria. It is also spreading to the North West of Nigeria, findings. revealed.
Access Bank is working tirelessly to curb hacking of its customers’ accounts online as far as the Twice Bitten campaign is concerned.
However, Access Bank in its bid to enhance financial inclusion has noted its intentions to significantly increase its customer base and deepen the wallet share of the banking population riding on its agency banking platform.
Access Bank agency banking ‘Access Closa’ recently hit a milestone of having 100,000 agents currently spread across Nigeria as the bank further plans to increase its footprint by having a minimum of 50 agents in each of the 774 LGAs across the country.
The Group Head, Agency Banking, Access Bank Plc, Chizoba Iheme, in a chat with journalists noted that due to the limited number of financial institutions, especially in rural areas, Access Closa is Access Bank’s strongest retail channel used in providing banking services to a large population of unserved and underserved Nigerians.
She said: “Our plan is to bank one in two Nigerians as this will see us increase our customer base and deepen our wallet share of the banking population.”
“Going by the high youth and adult population, the resources of Nigeria’s financial institutions are being overstretched in providing physical and human resources and were unable to cope with gaps that existed in meeting banking needs of Nigerians hence the need for Agency Banking as envisaged by the Central Bank of Nigeria (CBN) in 2013.”
“Therefore, Agency Banking helps financial institutions decongest crowded branches by providing a matching and more often convenient channel for their customers. In instances where reaching customers in rural areas is often highly expensive for financial institutions because transaction numbers and volumes do not cover the cost of a branch, agency banking helps in serving them.”
Furthermore, she added that becoming an agent has become a means to empower and reduce unemployment in Nigeria.
“Our commission structure allows an agent to earn up to N500,000 and more monthly in commission including incentives and opportunities for agents to grow their business and partner with a reputable brand is an attraction to the Closa brand.”
Furthermore, on risks associated with agency banking in the country and how Access Banks moves to mitigate it, she added: “There are four major risks that we have identified. These are Technological, Legal, and Fraud/Reputational. Assets.
“Technological Risk, to prevent software and hardware failures, the bank is investing in new infrastructure with the capacity to absorb service disruptions that will have minimal impact. As part of our onboarding process, the bank’s agents are required to execute a service agreement that stipulates the roles and responsibilities of each party.
Also, agents are trained at the point of activation on Anti-Money Laundering (AML) and Terrorism Financing. This training also takes place every year to reiterate the dangers and consequences associated with fraudulent actions. Besides, the bank has set a maximum daily limit on the amount and frequency of transactions that can be performed by an agent. Lastly, a quarterly risk profiling exercise is carried out on all agents for effective management,” Iheme added.
Access Bank is the leading retail bank in Nigeria with over 600 branches and more than 40 million customers. The bank offers products and services tailored to suit the lifestyle of every Nigerian irrespective of age and demographic.
Winners Emerge In Stanbic IBTC Reward4Saving Promo Season 2
Winners Emerge In The Stanbic IBTC Reward4Saving Promo Season 2
Stanbic IBTC Bank Plc, a subsidiary of Stanbic IBTC Holdings Plc has rewarded several of its new and existing customers with cash prizes of ₦100,000 in the maiden draw of season 2 of its savings promo, Reward4Saving.
The first draw of this season, which took place at the Stanbic IBTC Head office on Walter Carrington Crescent, Victoria Island, Lagos State, saw 70 customers win cash prizes of ₦100,000 each. The Bank aims to maintain this throughout the 12-month promo time by which a total of 840 customers would have been rewarded with ₦100,000 during the monthly draws.
The Bank also aims to reward 28 customers with ₦1 million each in the quarterly draws, and seven customers with ₦2 million each in the grand finale draw.
Speaking at May 2022 draws, the Chief Finance Officer of Stanbic IBTC Holdings, Kunle Adedeji, said the bank recognizes saving as an important aspect of its customers’ journey to financial freedom, and it is for this reason that Stanbic IBTC has decided to continue with the second season of the Reward4Saving Promo to reward and inspire more customers to reach for their dream of financial freedom by improving their savings culture.
“Our aim is to promote a savings culture by rewarding our existing and potential customers as they save for the future. As an end-to-end financial solutions provider, Stanbic IBTC is committed to creating channels and means of financial empowerment for its millions of customers while rewarding them for their dedication. Simply put, we put our money where our mouth is.
Reward4Saving 2.0, as we like to call it, is themed “Bigger and Better”. This is because we have increased the expected wins to allow more customers from across the geo-political zones of the country to walk away with cash prizes worth a total of N156 million, with individual wins ranging from N100,000 to a whooping N2 million.,” he added.
The Chief Finance Officer further stated that existing and prospective customers can take advantage of this opportunity by saving a minimum of ₦10,000 in their savings account or @ease wallet, for at least 30 days. One electronic raffle ticket is issued for every N10,000 saved, thereby increasing the chances of winning. New customers would also be rewarded with ₦500 worth of airtime and three months of free interbank transactions when they open a Stanbic IBTC Bank account. Stanbic IBTC Bank is a subsidiary of Stanbic IBTC Holdings and a part of the almost 160-year-old Standard Bank Group.
100 Undergraduate Candidates Set To Benefit From Stanbic IBTC’s University Scholarship
Stanbic IBTC Holdings PLC, a member of Standard Bank Group, awarded scholarships to 100 Nigerian youths who had excelled in University Tertiary Matriculation Examination (UTME) and had gained admission for the 2021-2022 academic session.
The grants, which would provide the students with the financial aid needed to fulfill their educational needs and pursue their dreams, demonstrated the financial institution’s commitment to the growth of the Nigerian education sector.
Each of the successful candidates, who had recently gained admission into universities, would receive scholarships valued at N400,000. The grants would be disbursed in tranches of N100,000 across four academic years.
The financial institution stated that it focused on empowering bright-minded individuals with the capacity to gain adequate knowledge needed to become great men and women in life.
The initiative which commenced in 2019 now has had almost 200 recipients. The beneficiaries were chosen across the six geo-political zones in Nigeria through fair screening processes.
According to Dr. Demola Sogunle, Chief Executive, Stanbic IBTC Holdings, the scholarship was borne out of the need to empower hardworking and diligent young Nigerian undergraduates, who aspired to pursue their tertiary education in any state or federal university in Nigeria.
“We believe that everyone deserves a chance to access quality education and we believe in rewarding students who have shown remarkable academic excellence. This initiative will go a long way in easing the financial burdens of these undergraduates who participated in the UTME and gained admission into various Nigerian state and federal universities for the 2021-2022 academic session. We are pleased to announce the 100 winners of this year’s scholarship scheme for undergraduates in 33 universities across the 36 states and the FCT. We wish them great success in their academic journey” he said.
Asides from the first tranche of disbursement, subsequent disbursements would be subject to beneficiaries maintaining their enrolment in their respective universities and degree programs they were admitted into, adhering to the academic and administrative policies of the university, and the provision of a letter of good conduct issued by their respective departments. Beneficiaries would also be required to maintain a Cumulative Grade Point Average (CGPA) of at least a second class upper range, among other requirements.
Demola further added that education remained one of the keys to facilitating a nation’s prosperity, hence the introduction of the scholarship initiative. Stanbic IBTC remains committed to driving value-added initiatives like the University Scholarship program to contribute to the educational development of the Nigerian youth.
Alliance For Youth Nigeria Equips Youth Across The Country For Employment
Danbatta Applauds Pantami’s Appointment As WISIS Chair
LAWMA Renews Offensive Against Infractions
Exclusive Interview: Microfinance Bank As Catalyst for MSME Development in Nigeria
Institute For Tourism Professionals Elected Otunba Ayo Olumoko As Zonal Vice President
NGX CEO Temi Popoola, Others Attend CIS Investiture Ceremony
Business4 months ago
Institute For Tourism Professionals Elected Otunba Ayo Olumoko As Zonal Vice President
Business10 months ago
NGX CEO Temi Popoola, Others Attend CIS Investiture Ceremony
Energy11 months ago
Olusegun Mojeed Appointed As First Deputy Secretary General
Money Market10 months ago
Eid-El-Kabir: FirstBank Felicitates with Muslims
Economy11 months ago
CBN to Crash Price of Rice Despite Inflation
Brand6 months ago
Nestlé Nigeria Introduces Pure Life Sparkling Water
Business11 months ago
GTBank To List Holdco On Stock Exchange
Business11 months ago
Low Tax Collection Limits Nigeria’s Fiscal Flexibility – Report