- December 7, 2020
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How did your journey with Mainstreet MFB start?
I joined the bank in 2009, more than 11 years ago. Before then, I had worked in different places. Altogether, I have about 20 years working experience. This bank used to be a subsidiary of a commercial bank for up to eight years. I worked in different department of this bank before becoming the CEO.
We have different categories of MFBs. Which category does Mainstreet MFB belong to?
We have four tiers in line with the new regulation. We have tier 2 Unit MFB which are supposed to be rural MFBs and we also have tier 1 which is a Unit MFB but operates in the city like Lagos. Then you have the State MFB that is permitted to operate all across the state and then you have the National MFB. Currently, we operate a State license with branches all over the state, even when N100million was required for a State MFB, we were already operating with shareholders’ funds in excess of N1billion.we hope that very soon, we will be able to operate at National level where minimum capital is N5billion.
Covid-19 is the crisis that the whole world is currently grappling with. How is it particularly affecting MFBs?
It is affecting some businesses negatively and, others positively. But largely, to the majority, it is negative. It has also affected MFBs negatively.
The fact that for more than a month in this country, we could not open shop, also has an impact on us. You also have a number of our customers who actually depend on imported goods from China to sell. Some of them have importers from China, who could not supply them. All these together, it will affect us because these are the people we are serving. Don’t also forget the general impact on the larger economy where you now have the forex shock. You have a situation whereby the exchange rate suddenly went from N360/$1, which you used to be the roadside rate, going up to N480 per dollar. When that happens, it impacts on everything that is imported into the country; the prices on the street have gone up. Even those things that are produced locally, for instance the price, which is a staple food, has gone up. We live in the same society with our customers. As it affects them, it will come back to affect us.
Following the outbreak of COVID-19, the CBN quickly unveiled palliative measures, first for the commercial banks and later for MFBs. Have you started implementing these measures?
Most of the palliatives that the CBN rolled out are palliatives through commercial banks. For instance, you have measures targeted at manufacturing and pharmaceutical; you have those that are targeted at agriculture and so on. Most of them are actually through commercial banks. Now you have the one that is supposed to be through MFBs, which is the N50billion facility for households and SMEs. What people should know is that this went through only one MFB-NIRSAL MFB. For us, as individual MFBs, none of those palliatives has come through us. At the level of the National Association of MFBs, we have engaged the CBN, we have written to say, okay, it is either you make us participate in the disbursement of the N50billion or you give us another one. As far as I know, we are still expecting the CBN to respond.The CBN had announced an increase in capital requirements for MFBs before the outbreak of Covid-19. Some stakeholders have called for an extension of the deadline set by the apex due to the pandemic. What is your stance on the issue?
What the CBN did was that they increased the capital requirements for the initial three categories that we had; Unit, State and National MFBs. That was back in October 2018 or thereabout. Now the Association engaged the CBN and urged them to take another look at the new capital requirements. So, we engaged the CBN and they came up to say that they had created another tier, Tier 2 Unit MFB for MFBs that are operating in the rural areas and they reduced the capital requirements for this category to N50million. They also allowed a situation whereby rather than you having to meet all the requirements at once, you can meet it in phases- in two phases actually. The same thing is applicable to other Tiers. By that arrangement, we were supposed to meet the first level by April 2020 and meet the second level by April 2021
Now, given that we were still engaging with them on the issue, the CBN, having considered the impact of COVID-19on the existing MFBs and on the ability to raise new money, they extended the first stage to April 2021 and the second stage to April 2022. We are still engaging them because that extension was done on the assumption that the pandemic would have been over by now, but we are still in it.
Our economy has also been disrupted by #ENDSARS protests for about two weeks now. So, I think it’s good and fair for the regulators to think about extending this time further or even suspend it until we are sure about how the pandemic will end and then you cannow have a new program maybe for another two years or thereabout that we can work with.
The Global Standing Instruction(GSI) is one of the topical issues in the industry. The CBN has said they are working on onboarding MFBs and other OFIs on the platform. Are you prepared for it and do you think it is going to have positive impact on reducing bad loans?
In terms of preparation, we still have a few things to do as a sub-sector. This is because as at today we have more than 900 MFBs and I don’t think a large percentage of us are prepared
Preparation begins from your ability to be hooked onto NIBSS. It is not all of us that are hooked onto NIBSS which is the custodian of the GSI. As an institution, Mainstreet MFB is prepared because we have been with NIBSS for more than two years now. The GSI is a welcome development because in our society, the attitude of people to credit is very bad. You have a situation where people collect the money and it becomes difficult for them to pay because they don’t actually put priority on repaying. So, it’s a welcome development. Having said that, I think the CBN really needs to take another look at the policy because it is targeted at individuals, it is not targeted at companies. But the most notorious borrowers in Nigeria are the people that can hide under the cloak of companies. Also, from the legal analysis that we have, partnership accounts are not corporate accounts. The Regulator needs to look at the application of GSI to partnerships and joint accounts. But I believe that it is a welcome development; it is good for our society; it is good for the banks, it is also good for the economy. It is also a way of helping people who invest in banks to know that another person will not come and make away with their money.
Even before COVID-19, there was the perception that the MFBs subsector was not leaving up to expectation. Can you tell us what the challenges are?
Microfinance business is highly localized. You have to put the culture and the generally acceptable practices of a society into consideration.You have to be conscious of the peculiarities of our own society. You have microfinance practices in India, Asia, America, Latin America. All of them put into consideration the realities of those societies. So if the MFBs sub sector in Nigeria has not really lived up to expectation, part of the things we really need to look at is whether the regulation actually factors in enough from our own peculiarities? Another thing is that if you look at the places where we copy from, you will find out that there is nowhere that the success microfinance is left solely for the private investors. The Government has its own roles to play. For example, one of the most difficult things to do in Nigeria today is to lend to SMEs because the risk is very high. If you want to reduce the risk of any sector of the economy, it is the responsibility of the government not the responsibility of the individuals. Also, in all the societies that we look up to, you will find that when private people set up microfinance institutions, the government supports them. They usually have the basic standards that they must meet. If you meet the basic standards, there is a place where you can go and draw money to fund your activities. It may not be in cash but in the form of Government guarantee. You cannot expect a situation where everything that we use comes from private purse and think that we will be able to scale the way we are expected to scale. Today, we don’t have a public fund that we are drawing from. In the past, around 2012, 2013, the CBN launched MSME Fund. It was supposed to be N220billion, we expected that it should have been targeted at MFBs which are actually the ones that are ready to fund SMEs and the people at the bottom of the pyramid. But that was not the case. A few MFBs drew off the money, though not on very friendly terms. I’m not sure we have drawn up to N10billion before it became non-available. So if you have that kind of a situation, you don’t expect the MFBs to do very well except those ones that have other means of funding like the foreign owned institutions. By the way, the issue of funding SMEs should be the primary role of government. They are the ones that have tax payers’ money. They are the ones that determine the direction of the flow of cash within the economy. Having said that, I think a few MFBs have done very well. Today, on our own, we have total asset base that is close to N10billion, all from our private efforts. So if I have a loan portfolio of N5bn, you cannot say I have not done well. This is because this is money that we deploy largely without taking tangible collateral. We fund people who have their primary account with commercial banks. That means that when they make money they go and put it in commercial banks, when they need to borrow these commercial banks won’t give them. So, we will give them the money; we will take the risk. So if those SMEs don’t have money, who do we blame? The commercial banks where they keep their money or MFBs who take the risk on them? When you analyze the situation, it’s a society thing; it’s a government thing; it is not an individual thing. A few have tried.
There is a particular MFB that is as big as a commercial bank in Nigeria today. There is a National MFB that has gone to the market to raise bond, they didn’t only raise bond they listed the bond on the Stock Exchange. So, when you look at those MFBs, you cannot say that we are not trying, but the government has to provide the enabling environment.
Does the BVN not help to prevent the problem of customers taking loans and relocating without paying back?
BVN is one of the best means of identification in Nigeria today. But what we need to consider is what information is required from a customer when he or she is being registered for the BVN. They take your address and your biometrics. For the bank to be able to get value out of that, it must be able to locate the person when the person relocates. For example, if in providing my biometrics I provided an address that is in Ikorodu, the day he relocated from Ikorodu to Ajegunle, there is no law that says that you must come and notify your bank that you have changed address or if you don’t do this, there is no law that says you will be sanctioned. So, the BVN will not really help, if somebody takes a loan and relocates without repaying. We must have identity base that is all encompassing. That is why it is necessary for the country to harmonize information on our international passport, BVN, Drivers license and so on. If you do this, it means that there would also be a law that would say if you change your address, within a specified time limit, you must go and notify the authorities, either at the National Population Commission, the NIMC, or at the banks. But it must mean that when you change the address at one of these places, the change is reflected in the other places. So the government has a lot to do. If it provides the enabling environment, a lot of investors will feel secured to bring in enough money.
How do you see the competition from Fintechs?
The competition is there even before the advent of Fintechs, the competition was fierce, because we are many and people come from outside the country and they have the financial muscle to compete. But the good thing is that the sky is big enough for all the birds in this world to fly. So, what every bird should learn is to how to fly. Thus there is no need bothering so much about the presence of competition because there will always be competition. In any good market, there will be competition so you don’t bother yourself so much about that. Even with the competition from the Fintechs, we still have the market. There are certain things that they still cannot do. It’s not only the Fintechs that are competing with us, the commercial banks are also our competitors. But I can tell you that we still have our own market. There is also room for MFBs to collaborate with Fintechs and that makes it very good. Most of the things that Fintechs have are what we can have. If you have the financial wherewithal, you can buy a Fintech. If you don’t have, you can partner with them. So, the sky is big enough for everybody.
What kind of mark has Mainstreet MFB made since it started operation?
As an institution, we have disbursed close to about N30billion over more than eleven years that we have been operating. We have also made a niche because as far as back as 2009, we have been attending to the education sector. We have disbursed loans to teachers over the period. When we did our 10th year anniversary, we had practically all the chapters of the Teachers Union in Lagos State represented at the event. At their Union level, we have also been recognized. In addition, we started financing private schools-nursery, primary and secondary schools. Today we have about 200 private schools on our books which we have financed over time. Aside from education sector, we finance local Government employees. We are also trying to replicate same for those in the health sector, to enable them to be able to have family businesses. Recently we signed an MOU to partner with a particular pharmaceutical company that has more than 1000 Doctors on their network. We are going into a number of other sectors such as Agric. We don’t finance primary production for now, but we may do it tomorrow. However, within the agric value chain, off takers, buying fertilizer and so on, we fund them. Now, we have added Renewable energy. This is because we believe that with the way our society is positioned, we really need more energy and more of that is renewable energy and gas. We have a number of such operators in our books.