MfB sub-sector needs CBN bailout — Ogun State Chairman, NAMB
The Chairman, Ogun State Chapter, National Association of Microfinance Banks, Alhaji Shodiya Samsideen Ajani in this interview with NIGERIAN NEWSDIRECT said the Microfinance Bank sub-sector needs Central Bank of Nigeria (CBN) intervention, stressing that the COVID-19 pandemic has deepened the MfBs’ Non-Performing Loans (NPL). Shodiya who is also the Managing Director, Trust Microfinance Bank Limited opined that CBN’s creation of NIRSAL MfB is a wrong policy that does not help those at the grassroots.
What has been the secret behind the steady progress you have recorded over the years?
At inception, we had a lot of challenges. We were not a MfB initially. We were Egba-Owode Community bank. Later, we metaphor to MfB around 2008 when the Central Bank of Nigeria (CBN) changed its policy with a mandate that community bank must be converted to MfB. It was on that policy we changed from Egba-Owode community bank to MfB.
To the glory of God, there is nothing new someone will start that there will be no challenges. To the glory of God, we are overcoming our challenges and moving stronger.
What has been the relationship between Ogun State Government and the MfBs association?
Some years back, we had a good relationship with the state government. Some of the MfBs were collecting revenue on behalf of the Ogun State Government. It was during the era of Otunba Gbenga Daniel that MfBs benefitted from state revenue and we had no problem.
It was during the regime of Senator Ibikunle Amosun that State Government decided to suspend that policy. Maybe the government then did not want MfBs to collect much of the state’s revenue and that reduced our access.
The State Government had their reasons which include immediate remittance of which MfBs cannot meet. The machinery MfBs had on ground will not permit them to immediately remit government funds. The relationship was unlike that during Otunba Gbenga Daniel regime.
Some workers were paid by MfBs. Some secondary school teachers, local government pensioners, among others were collecting their monthly salary through the MfBs and we were lending to them as well.
Once they are transferred, they were still collecting salaries due to services relationship they enjoyed from us.
Our service was immediate and prompt as were also salary advance, housing loan, emergency loan, among others for salary earners in Ogun State.
Most workers were enjoying loans from MfBs across the state. We used to disburse loans to workers. I know about 2-3 MfBs that are still enjoying the opportunities of paying salaries to workers, among others.
How has COVID-19 impacted on customers loans to the sector?
On the impact of COVID-19, that is a major problem MfBs are facing in Ogun State. Some of the customers we gave loans before the lockdown are unable to pay back.
I can tell you that most of them are yet to pay till this moment. Some are even out of business. Take for instance, some of the private schools that borrowed money from MfBs who are yet to pay back those loans. The lockdown affected them badly as most private schools were locked down for six-nine months. Even when schools resumed, these private schools were not paying salaries as most parents were also struggling. Things were difficult for these private school owners. So, MfBs have to reschedule their loans in order to encourage them to pay back. Some were unable to pay back despite we rescheduled their loans.
The lockdown also affected market women coupled with restriction of movement of goods to the market. Some of these market women spent the little they had on feeding. The negative effect of the pandemic cut across and it impacted on a lot of things. It was in the news that government was planning another lockdown amid second wave of the virus. Those the first lockdown affected will be suffering the second time.
We are doing close monitoring on loans given to customers and appealing to them. Before the COVID-19 pandemic surfaces, we were using force to recoup our loans. Right now, things have changed as we persuade them to pay back some of the loans they have borrowed. Some of these customers wanted to pay back but economical challenges are making things hard for them to pay back. We will continue to engage them to pay back their loans.
When NDIC visited us, our Portfolio Access Register (PAR) was 10.5 per cent. The benchmark is supposed to be 5 per cent. Presently, we have noted that it might increase to 12 per cent. Automatically, it has added 7 per cent, above the benchmark of 5 per cent.
Does MfBs really need bailout from FG and CBN?
I don’t think the state government can do anything. It is only the CBN that is in the position to bail the sector out. I don’t know what we have done to the CBN. In the past, SMEs funds were channelled to MfBs. All of a sudden, they (CBN) stopped it and floated NIRSAL MfB and they wanted to have office in each local government in Ogun State.
For now in Ogun State, we have one NIRSAL MfB and it is in Abeokuta. How can NIRSAL in the state capital reach out to those at the grassroot? We have made a lot of advocacy to CBN on the need to use existing MfBs instead of floating a new MfB.
How can everyone travel to the state capital and access loans? Parts of these are the major problems with policies in the country. A day will come that leaders with listening hears will rule us in this country. The CBN’s NIRSAL MfB creation is a wrong policy. By the end of the day, it might not flourish and perform its functions.
Do you mean the CBN should grant MfB bailout?
Yes, we need it. We have written a lot of letters on this issue. We have been begging for bailout funds for MfB so that it will help us to cushion the effect of some of the problems bedevilling micro-finance bank in the country.
How much do you suggest micro-finance banks should be granted?
For instance, my bank is the first to take MSMEs funds in Ogun State. They gave N50 million and we paid back within the stipulated time. Since then, we have not heard anything from them. We applied but they didn’t grant our request. That is why we have decided to manage the little resources at our disposal.
Recently, there was a suspension on the capital based requirements by the House of Representatives for MfBs. What is your take on the suspension?
A lot of advocacy, letter, consultation were done to facilitate this. We thank God that at the end of everything, the House Representative has assisted us.
We have also taken our issues to the Senate. The National office at Abuja met with the Senate recently on the issue. This is because we have to use the two legislatures- House of Reps and the Senate so that our request can have great effect on the CBN.
We did not say they should not increase our capital. Truly, the exchange rate has changed compared to what it was two years ago. No one is saying they should not increase it but the percentage is too.
My bank is State Micro-finance. They said we should have N1 million, we agreed. But all of a sudden they said we have to increase it from N100 million to N1 billion. Where would they expect us to get such a huge amount of money in this locality. That means that they are ready to send a lot of micro-finance banks into inexistence. They should give us and the percentage of increase is too much to bear. They need to help us to bring it down. This is because we already have the money we are trading with.
Take for instance, the deposits of my MfB is over N600 million. We have a loan of over N500 million with liquid cash that we have not touched. Yet they want us to increase to N1 billion. Even if we increase, where will we lend the money to? And what kind of business are we going to do with present situation in Nigeria. There are a lot of things such as electricity, internet, roads, and so forth. To do for us so as to make business easy in the country–we have about three generating sets because there is no light. We buy fuel worth of N150,000 per week. Multiply it by four, making N450,000 and by 12 to see it is a huge amount we are spending on fuel. Meanwhile, shareholders will expect their dividend from us.
Why is it that amid economy challenges, MfBs are increasing interest rate to customers?
I can say things about my own bank. I don’t know about other banks. We are charging the same rate as in the past. This is because we don’t want to add to the burden of our customers. The rates we have been charging three-four years ago, is the same rate we are charging now. And I do not have any knowledge that other banks have increased theirs because of COVID-19.
If they do this, they are compounding their problems because their customers may not be able to pay. It is not advisable that MfBs increase their interest rates because of pandemic. The customers too are trying to survive, so we should not contribute to their hardship.
It is distributing that some MfBs report loan defaulters to the police. Do you think that is appropriate?
We have categories of customers. Some customers or debtors are willing to pay but due to one reason or the other while some have the money, but are not ready to pay. We have to make sure that we pressurise them to pay our money. There are many customers in these categories. We would even take some of them to EFCC and then they would pay. If you don’t pressurise them, they will not pay. That is why we have Orthodox and Unorthodox methods to recoup our loans. Some of the debtors deserve to have their names published in newspapers. If you don’t pressurise them for payment, it will tell on our accounts. The little income you would have generated, you can’t give excuse that bad loans have taken it away.
On CBN MSMEs how much has your Ogun State Association benefitted?
We have not benefitted at all. They said they can’t channel any funds through micro-finance banks because they have theirs. They haven’t been giving us anymore for the past five years. We have made several consultations. We have written several letters. But they have insisted otherwise. We don’t know what’s happening. They are not ready to assist at all. That is the problem we have with Nigerians. For instance, the headquarters of my bank have over 25,000 customers. If we remove moribund customers, we can still boast of 20,000 customers. If they give us a loan N200 million, it will have a lot of impact on the economics of the people of Owode-Egba and its environs or the areas the bank covers. We have about five branches with the headquarters. We have branches in Magboro, Mowe, Ibafo, Abeokuta and headquarters in Owode. They are not ready to help because they don’t listen to us.
How best can Nigerians enjoy the services of MfBs?
The people around this area are really enjoying micro-finance bank services. For instance, some salary earners have built their houses through loans from MfBs. They have acquired houses through loans accessed from MfBs.
They have been able to send their children to schools. The farmers and market women are not left out as they too have benefitted. We have a lot of products. We have designed about 12 different products for our customers which they are currently enjoying. For instance, we have about four different products for salary earners. We have overdraft, individual loans, asset purchase acquisition loan, among others.
That is why I told you earlier that the deposit state of my bank is over N600 million. The people here are really enjoying. I can tell you that our outreach will increase to all levels both Owode here and outside here.
Overall, what has been the challenges of operating MfBs in Nigeria?
One of our challenges is infrastructure, then electricity. For example, we are running on three generating sets. We run businesses from morning till night. Yet there has not been light for the past seven to eight months in the whole community. Only last month through the efforts of Honourable Olumide Osoba and other notable dignitaries have we been able to purchase transformer for the community.
Our roads too are bad. When the farmers produce farm products, they won’t be able to access the market for sales due to bad roads. The local governments are no longer efficient. People had to contribute together to build their own rural roads before they could take their farming products to market. Another problem is that some of the customers have financial challenges to the extent that they don’t have enough money for trading. They depend largely on the little money at their disposal to do business.
What’s your word of advice to government ?
My candid advice to government is that they should focus more on rural development. This is because majority of the youth in the rural areas want to move into urban areas. All the necessary infrastructures such as water, electricity, good roads and internet should be provided in rural areas so that young school leavers would desist from moving into urban areas.
This will certainly reduce the migration from rural to urban areas. If this is not done, we are still deceiving ourselves. The rate of crime also will continue to increase. If all the needs of the people in rural areas are provided, there won’t be any problem. Apart from this, they will like to participate in farming business. Our economic problems may not be resolved if all these are not done.
