Micro business cannot survive high interest rate — CEO, Covenant MfBs

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The Chief Executive Officer, Covenant Microfinance Bank, Mrs. Odunola Owolabi In this Interview with KAYODE TOKEDE speaks on the microfinance industry, the plan by Central Bank of Nigeria (CBN) to review the sub-sector’s capital base, among other related issues. Excerpts:

As the CEO of Covenant MfBs, kindly take us through the micro-finance industry under the present economic indicators.

With economy just exiting recession, the capacity of the people to mobilize excess liquidity for economic development has been negatively affected because of the low economic activities. Purchasing power is weak and this has affected a lot overhang in the inventory of the few businesses still in productive activities.

This affects the cost of doing businesses, and the ripple effect is much because the value chain of the economic activities is not expanding for the microfinance banks to be able to lend successfully. Inflation rate is high and micro business cannot survive the high interest rate.

 

How will increased minimum capital base impact on the MfBs performance if review-ed by CBN?

Increased Capital Base if eventually reviewed by the Central Bank of Nigeria, will make the microfinance banks strong enough to withstand the vagaries of the financial sector and enable them to do more lending and reduce cost of doing business. Improvement in Information Technology facilities will equally facilitate banking services to the target market.

Of the N220billion Micro Small & Medium Enterprises Funds (MSMEDF), how much has Covenant MfB accessed and the challenges/success stories recorded so far?

Due to the peculiarity of the location of Covenant Microfinance Bank as a one branch bank, we have not been able to access the micro, small and medium Enterprises funds (MSMEDF), but this will be achieved in no distance future as the bank is set to spread its tentacles to Ota Central, thereby enabling us to reach out to the core grassroots.

On government, regu-lating bodies’ policies, which one do you think has impacted negati-vely/positively on the MfBs industry under the present adminis-tration?

The Central Bank of Nigeria policy to give support to microfinance banks to purchase BVN machine has helped significantly in reducing the financial pressure on the microfinance banks, and also to reduce the multiplication of bad loans in the industry, same goes for the introduction of Credit Bureau.

However, the geographical restrictions policy to the provision of microfinance services needed to be reviewed towards achieving the purpose of financial inclusion.

What has been the impact of MfBs on the grassroots, especially where you operate?

The Covenant Micro-finance Bank has impacted on the grassroots immensely, transforming ordinary individuals to creators of wealth, empowering many to be self sufficient and turning them to employers of labour, thereby creating a multiplier effect on the economy through increased economic activities.

How are you managing loan defaulters and factors contributing to loan defaults in the sector?

Loan default is a growing phenomenon in the industry, majorly caused by poor credit and risk analysis inherent in each proposal. It is also caused by insider interest in most institutions, as well as weak economic activities.

We manage this problem with strong corporate governance around our credit activities that allow for proper credit analysis on each request and strong risk assessment.

Our anchor scripture, which is displayed publicly around our office is Psalm 37:21 “The wicked borrowed, and payeth not again” has been a strong weapon deployed towards recovery of facilities and it has really helped out.

 

For how long has Covenant MfBs started operating and what are reasons for its establishments?

Covenant Microfinance Banks commenced operations as Covenant University Community Bank in March 2004, and transformed to Covenant Microfinance Bank in 2008. We currently have a licence to operate as a State Microfinance Bank.

Our core vision is “Transforming Ordinary Individuals Into Creators of Wealth”. Mission:  To meet the development needs of the community,   to intellectually promote creativity and   To serve as an instrument of wealth creation

Take us through your Products and Services at Covenant MfBs?

By the grace of God and by a commitment to the core values of the institution on – Transforming ordinary individuals to creators of wealth, Covenant Microfinance Bank has so many products and services tailored towards achieving its core value and also to enhance the Bank/customer relationships with our numerous customers. Such as Dream Asset Acquisition Product (DAAP), use of POS, gallery of ATM which has transformed the fate of Covenant Microfinance Bank.

And as we open to business with the Ota metropolis, the bank is coming up with several products meant to boost customers’ trade among other benefits.

What are the ways Covenant MfBs had been able to catch them young since you operate close to two Universities?

The peculiarity of our location has added so much value to the bank, and efforts are being made regularly to marketing the students to open a savings account for their upkeep allowance. And we also engage quite a few of them for their industrial training programmes where they are being sensitized on financial literacy.

What are the ways Covenant MfBs have encouraged innovations and new partnership that has created wealth and jobs?

We have shown great interest in the outcome of researches from the University and partner in financing small scale business activities arising from such. We have also been part of a number of workshops and conferences organised by the University.

Where are you likely to be in the next three to five years?.

By the grace of God, we are trusting God to becoming a National Microfinance Bank with branches in more states of the Federation, thereby fulfilling our mandates with more products to boost economic activities in our target market. We are so much excited about the future ahead of us and our clients.

On financial inclusion, what are you doing differently to support the CBN?

I do workshop on financial literacy and products development for the target market. And also, we sensitize the public at the bottom of pyramid on the importance of saving by inculcating the culture of savings and spending wisely.

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