The newly elected president of the National Association of Microfinance Banks (NAMB) and chief executive officer of Hasal Microfinance Bank, Rogers Augustine Nwoke, in this interview with BAYO AMODU, spoke on the need for microfinance banks in the country to have access to wholesale funds so they can lend more to their customers among others.
What are your plans for the NAMB and the industry now that you are the national president?
The association and the industry are two dimensions that ultimately should converge for the interest of all. Let me start from the association. Every microfinance bank in the country today innovates from the microfinance policy that was launched in December 2005, from there those who were formally community bank transformed and many that were also licensed. So you can say the association is seven years old having been formally inaugurated in 2010.
We haven’t done much; the association has been struggling from one leadership issue to the other. So the first thing myself and my team have agreed to do is to go on a genuine reconciliation of everybody that is in microfinance subsector because we believe that with all of us coming together on the same platform, we will be able to work together for the good of the industry, that is the first thing. The second is to give the association the prominence that I think it should get.
We need to give it a better reputation; we need to project it a lot more for the main reason that we are dealing with people at the bottom of the pyramid.
What is the difference between what you do and what the commercial banks do?
First and foremost we are all banks; the difference is that we are microfinance banks that finances micro businesses. We do everything that commercial banks does. The difference is in the size of businesses we finance. Commercial banks can lend money like one, two, five billion and more to big corporate establishments but in microfinance bank, we can lend money to an individual, low income people and small businesses.
Sometimes microfinance banks that have the capacity can lend money to medium businesses; it’s a function of what the regulation says you can do. So the difference is in the size of the loan.
We have seen cases of micro finance banks engaging the service of the police to recover loans from defaulters, tell us how you tackle such issues?
It’s one of the biggest issues we have. Generally, in Nigeria the credit culture is bad but we are worse hit because loan recovery is an expensive venture, that’s why you do everything to give loans to people who will pay back. When people default, the cost of recovery is very expensive. What we have seen is that there are serial defaulters who have entered our system because they know that many micro finance banks do not have the weight, the capital and the muscle to embark on aggressive recoveries.
What are we going to do? First of all, we will encourage our people to not engage in self-help, don’t fight, don’t get violent and all that. The biggest opportunity lies in the judiciary and we would try to engage the judiciary, the police and other law enforcement agencies.
The problem of using the court is the time it takes; from the report you get from our members, some micro finance bank have cases in court to recover their loans that have been there for about four years or more. We want to see how we can engage the judiciary.
The CBN has given a deadline that all micro finance banks must issue BVN numbers to their customers, how are you going about it especially the cost of carrying out such directive?
We have been working with the Central Bank of Nigeria (CBN) and the Nigeria interbank settlement system in getting micro finance customers to get their BVN. We strongly believe that getting every bank customer in the country, whether micro finance or not is good. So the association is giving it everything.
As we speak today, our members are acquiring their own BVN machines. Our target is that between now and the end of September 2017; Many of us would have acquired our own machines and connected. As we speak, enrolment is going on. So, if a customer of a micro finance bank has already enrolled, all we need to do is to link that BVN number to his existing account but those who have not enrolled at all will have between now and December 2017 and we are doing everything to meet that deadline so that we can enrol everybody.
It’s good for us, we can use it to deal with all the KYC issues and be sure we are lending money to the right people whose bio data has already been verified in the system.
There’s this issue of negative perception of the microfinance banks with many having the believe that most microfinance banks are fraudulent establishments, what do you make of this?
Well, like I said before, it’s unfortunate that such perception exists. I will throw it back at you, if you are not a thief and someone goes everywhere calling you a thief, how do you prove that you are not a thief? The only way to prove you are not a thief is when you don’t steal.
Microfinance banks are not thieves. The model of micro finance bank that we started in the country made it so and when you tell somebody that he can start and run a bank with N20 million, you didn’t tell him the truth because N20 million cannot run a bank. That model was meant to help us set up the banks and then provide the wholesale funding, the liquidity with which we do the business.
So micro finance banks have suffered because of the issues we have raised here. The capital base is small; the liquidity is not there. The situation we have is where depositors put all their savings in the commercial banks but when they want N50,000 to pay school fess, their commercial bank will tell them to try a micro finance bank so those who have money keep it in commercial banks, those who need money go to micro finance bank to borrow.
The question is where do the micro finance banks get the money to lend? There has to be a handshake and that handshake is that micro finance bank should be able to access wholesale funds. I don’t want the handout that CBN gives. The handout that CBN gives is only a handout, a handout can feed you today, it doesn’t feed you tomorrow. What I want is a structured commitment either by regulation or by law that commercial banks, because they collect the liquidity; the savings from small savers, should be mandated to give loans to microfinance banks to be able to lend to the small savers. There has to be a definite action plan in that direction.
What do you think the capital base for microfinance banks ought to be for you to be comfortable in doing your business?
The guideline which tries to categorize MFBs is fine. Anybody in that business knows that 20 million capital is not enough, I still think the issue would need to differ from whether you are a rural bank and that’s what we must re-classify.
Classifying microfinance into unit, state and national level is not sufficient. For instance, 20 million capital base which is the requirement for microfinance bank at the unit level, will probably set up a micro finance bank in my village but it cannot set up a bank in the city but they are all units. So I would rather change that model. We should categorize accordingly.
What would you be leaving as a legacy for your association?
Thank you, we would leave for the association a very strong advocacy. Today, people don’t recognize that microfinance banks have a contribution to them and yet the contribution is huge. Let me say one year from today, we are going to see an association that is visible, that the average micro finance customer will know that there is an umbrella where all the micro finance banks are, and a place of a resort they can run to if they are having any challenges.
There is going to be strong monitoring and evaluation of the activities of our members, we are going to do a lot of capacity building to ensure that there is expertise. Many of us jumped into micro finance bank without proper training. We are coming up with the micro finance institutions training centre which has already been put together.