In this interview with AYOBAMI ADEDINNI, the Chairman, National Association of Microfinance Banks, (NAMB) Ogun state Chapter, and Managing Director, Alekun Microfiance Bank, Mr. Joshua Ukute bares his mind on the Microfinance Bank subsector of the economy and suggests ways the country could move out of the current economic recession. Excerpts:
What can you say about Microfi-nance banks in Nigeria?
The Microfinance bank subsector is an emerging one. I think it’s about 10 years now that the sector is on. It’s been ongoing in Nigeria to cater for those in the lowest end of the pyramid. We can see that it’s fledgling not without the challenges as we have in every subsector of the economy in the country.
Stakeholders believe that the interest rate of MFBs is higher than even conventional banks and this is contrary to why they were set up. What can you say to that?
I wouldn’t say it negates what MFBs are meant to be. There is nowhere it is said that the interest rate of MFBs should be lower than any other Deposit Money Banks (DMBs) or even mortgage banks. But what MFBs do is to ensure that those at the lowest end of the pyramid have access to finance and credit as per when they need it. Now, when you have access to funds as per when you need it, and your business is enhanced, then whatever you are paying for that service definitely, you wouldn’t see it as being too much. But there is no basis of comparison between MFBs and DMBs.
What can you say about CBN’s policy on MFBs?
They set up the MFB in the first place so the policies are there to guide the operators of MFBs and to ensure we function in line with the regulations or guidelines. Though there are some policies that are a bit challenging which MFBs and CBN are working to make sure that they are being taken care of.
What are some of those policies you have challenge with?
For instance, is the use of Portfolio at Risk (PAR). This is a policy that says for every N100 that MFBs have, at least N5 should be performing. Your PAR should be at most 5 per cent. But looking at the economy and situation in the country, we believe that such a standard may not be met. Yes, we can meet it but most MFBs are having challenge meeting the PAR. I think the other one is on liquidity. How much you can have to trade with. These are issues that are not readily difficult for us but right now, most MFBs are trying to meet up.
Analysts believe a major reason for high NPL in MFBs is because of insider related credit. What do you say?
Ordinarily, that is where corporate governance comes in where issues of insider related credit is taken care of. Yes, we can adduce high NPL to many things but we have also forgotten that most of the credits we give out are practically insecure. The collateral is social collateral which is always difficult to realize when there is a default. But personally, I don’t think it is the bane of high NPL.
What are the ways through which Nigeria can come out of the current economic recession?
It is very simple. Government should empower those at the end of the pyramid. Let industries start running, micro billing start running. Government should be an enabler. Issues such as power crisis should be a thing of the past. If a micro entrepreneur has power, the cost will come down. If he has good roads to transport his goods, his cost will come down. And if he knows he can operate without any security threat, his cost will come down. Once this comes down, he will employ more people. So, the purchasing power of the public is enhanced and more dependents will be taken care of.
How do you think more Nigerians can embrace MFBs?
We have over 900 MFBs in Nigeria. What I usually say is that MFBs have to make their activities known to the public in form of media campaign. But I think most people know about MFBs but they only come when they need loans. So, I will tell Nigerians to go to where their business can be enhanced.
MFB customers have alleged that the way you retrieve loans kill their businesses. How do you react to that?
Don’t forget that MFBs are in business to make at least N1 profit. People have put their funds in this business. See, we give loans to customers from other customers’ deposits. If we give out loans and don’t get it back, how do we pay customers’ deposit? So, it behoves us to ensure that MFBs use every legal means to ensure customers pay up their loans.
Your final word of advice…
I want to say that the country is emerging and I believe that very soon, we will move out of recession. I also want to encourage my colleagues in the industry to keep up the good work knowing full well that one day; we will start reaping the benefits of our work.