No loan support from CBN to Microfinance Banks in Nigeria — National President, NAMB

The National President of National Association of Micro Finance Banks (NAMB), Alhaji Yusuf Ahmed Gyallesu, a Chartered Accountant and Economist, has expended about 38 years working in commercial, merchants and mortgage banking sectors. In this interview with MATTHEW DENIS AND RACHAEL OLALEYE, he spoke on reticent approach by Central Bank of Nigeria (CBN) failing to assist microfinance banks with loans to boost the economy despite the Federal Government loan intervention of COVID-19. The expert also touched on insecurity, inflation and other alarming issues surrounding the country. Excerpts:

Sir, we learned recently that the Federal Government through the CBN announced the addition of N50 billion ($120million) to its targeted Credit Facility, a stimulus program for Micro Small and Medium sized Enterprises (MSMEs), as well as households affected by COVID-19 pandemic. Is there loan support from the apex bank to microfinance banks?

There is no loan support coming from the CBN to Microfinance Banks, let me be frank with you. I know the government of the day is making effort and interventions to ameliorate the sufferings of people who have been affected by the pandemic. Like I told you we have 874 licensed microfinance banks across the country, the Federal Government brought N50 billion as intervention and many other interventions and these monies are supposed to go down to the poor and people at the grassroots affected by this COVID-19, a rational thinking person will say the vehicle for the disbursement are the microfinance banks because we are the ones operating at the bottom of the pyramid, at the grassroots so we should be able to access this N50 billion. The Apex bank should use us as conduit to go and disburse this money but what did they do? The government has a good intention through the CBN. But CBN brought this money and gave it to only one of us NIRSAL Microfinance Bank which is a creation of the Apex bank. It’s a creation of bankers Committee and the Chairman of this Committee is the CBN Governor so directly or indirectly is a bank owned by the Apex bank. The whole of this N50 billion was given to NIRSAL and don’t forget this NIRSAL Microfinance Bank is just barely two and half years old now and most of its management and key staff are people deployed from the CBN, you can see that it’s a consumer arm of CBN. So CBN got the money from the federal government to be given to every interested person or enterprises in the country and already these our microfinance banks are located across the country and NIRSAL Microfinance Bank is new and they don’t have the expertise because microfinance bank is a specialized form of banking. Even if you are a expert in banking and you want to do microfinance banking you are expected to undergo a training or certification for you to become a certified microfinance banker before you can hold any managerial position, whether you’re a professor or not. Despite my broader experiences in the banking sector I went through certification to become a qualified microfinance bank practitioner that’s why I’m solely and confidently holding the president of NAMB position. And this NIRSAL people don’t have anything like that, they don’t have the experience and no qualification as microfinance bankers and their spread is just within few locations and their idea is once given license they will partner NIPOST which has offices across all the 774 local governments in the country to have offices in all these councils. When we saw this idea we applauded them and said practically it is good but CBN as a government agency has no business in doing business that’s the first thing we told them, we cautioned them and wrote that we don’t have problem with another bank coming however CBN should not be the one floating this bank because you cannot be a regulator and operator, so who will regulate NIRSAL Microfinance Bank now? Can CBN go to NIRSAL and say they want to supervise its activities? Because the staff there are their colleagues so there is a fundamental error in that. We have written to the Apex bank because we have authorized licences and we are partners of government, so these funds should be channelled through us too. Give NIRSAL, we don’t have problem with that, but not everything. At least select some microfinance banks across the six geopolitical zones and put this money there. We as association (NAMB) are the regulators of these microfinance banks which means that anything that CBN is doing in microfinance banking sector we need to be consulted too as stakeholders, we should be part of the planning because we will be guiding them and they will get the best results. Remember what happened with the Archored Borrowers Scheme with over 80 percent default by CBN, but when President Buhari introduced it, he had good intention and Agriculture sector has improved even with the execution of the 20 percent. Anything that you want to do to touch the lives of the poor people you must bring microfinance bankers into it because we have been with the grassrooters since the time of Community banking so we know their business characteristics.

The Apex Bank late last year withdrew  licences of 42 microfinance banks over various degrees of defaults. What’s their fate today?

To correct this impression CBN never sanctioned any bank, the rule is you apply on your own that you want a licence to operate microfinance bank and CBN will stipulate requirement and conditions that you must fulfill. All these 42 banks were given licences and doing their businesses smoothly. Banking is a highly regulated Industry because we are entrusted with customers’ deposit, that’s why we are called deposit money banks. But we are distinguished between commercial banks. So we are regulated by CBN and the Nigerian Deposit Insurance Commission (NDIC). Those our members that their licences were withdrawn were operating like any other business but later they collapsed due to Economic downturn and some of them locked down without informing the CBN. Instead of complaining genuinely to the apex bank that their businesses are sick by returning the licences issued. They just closed market and you see for a serious bank to just close office without a serious reason, it’s a big offence because people that have their deposits will panic whether  their money is now safe or not, and this will give a negative impression to others that are operating daily. Therefore, to control the system every month we are required to send our returns to CBN on how we’re running the banks. They will analyze it and advise us appropriately on how to boost business activities. And at the end of the year we are required to send our audited accounts to the CBN for oversight and approval before we make it public. So these 42 delicensed banks had closed their operations on their own and were not sending monthly feedback and annual audited account to the lender of last resort. Then, the CBN team carried out inspection and discovered that these banks are not viable, and to protect depositors’ interest it had to withdraw their licences. To us, we were not happy because our members have been reduced but in reality they were dragging us back and the apex bank helped us to clean the sector.

There are speculations that microfinance banks are gradually taking over core responsibilities of commercial banks. What is your perception to this?

I don’t totally agree with that, once a bank has gotten licence from the CBN there are no limitations to the type of customers you collect deposit from or withdraw from your bank. But we in the microfinance sector our targeted audience is the bottom of the pyramid, because these are the people that empirical data has shown that majority of their activities are done at that level. But because of the peculiarity of their businesses when they go to these commerical banks they are not given attention. So we are expected to focus and give them all the support to turn their businesses around and lift them above the poverty line. These are people that are very poor but involved in one petty business or the other, now the commercial banks who are supposed to be wholesale banks are seeing the potential in this bottom the pyramid level thereby intruding into our space. Prior to this stage there are some commercial banks like First Bank, FCMB floating microfinance banks on their own. So they have the market of the macro-sector and floating our businesses, well to us they are welcome since the country is canvassing for more banking accessibility. Since we are advocating for Financial inclusion and for a population of over 200 millions people there are only 25 commercial banks and 874 licenced microfinance banks which is not enough to service the masses.

How is the insecurity situation affecting the banking sector in the country?

Certainly every economy strives when there is relative peace and ours will not be an exception. With the security challenge, there are a lot of restrictions on movement of goods and services which are  negatively affecting the economic growth in the country. For microfinance banks, just like other service sector, this is a place you open your shop and expect people to freely come in and go out, and in an area where you have chaos that free movement will be hampered and your business is affected. Once there’s no peace in the country the banking sector too will suffer setback.

Your take on the calls for deintegration of Nigeria?

This is a political question and I’m not a politician however, as a good citizen of the country definitely, I’ll have my own opinion. Frankly speaking, let us look at our neighbouring country Sudan. Their population is a fraction of our population and majority of them speak Arabic, so if there are other minorities, they are still Arabs, that’s to tell you how homogeneous they are. For such a country to have insisted on breaking and they have broken up and the peace they have been expecting never came. They fell into some many problems and they are still lamenting till date. My belief is that the more united we are, the stronger we become as people. Once we start deintegrating, what happens to our units? Like I’m a northerner and here is Abuja, if you say the Biafrans and Oduduwa should be given their chances, and the South South people — because from the feelers I’m getting, they don’t want to belong to any of these groups for fear of marginalisation. We are so scattered and intertwisted, you will find a lot of Igbos in the North and Hausas in Lagos. Once there’s breakup, what happens? Does it mean that everyone must go back to his original place? That will bring a lot of chaos, and in any nation you go, if people are not mixing coming with their wealth and experiences, know that the development there will not be much. People are thinking once they are on their own they can strive, but when you get your own nation there will be inherent issues that will come up even beyond the broader nation you were in. I’m calling for One Nation, we should cooperate and understand our cultural diversity. I’m surprised that these agitations are coming now. In those days of first republic, there was regional government and those things were not there. People were crisscrossing to the various regions and there was competition. I think we should look at our 36 states and each state should look at its potential and try to be productive rather than depending on the centre.

How can you rate President Buhari’s Adminstration in terms of Economic viability?

Critically examining the antecedents of President Buhari in the 1980s, we all know what he did, at least I was wise by then. He brought sanity and discipline into Nigeria. Nigerians want somebody that is rugged to rule the country but when he came to power this time the system is different because of democracy. No matter what Buhari wants for the Nation as the Executive president, he can’t achieve it, because he can only write a memo which must pass through the National Assembly before it’s approved. During the military regime it’s a self decision and declaration. So in this dispensation these people that he will send memo to, there are some that are in his party and some in opposition. There is a lot of sabotage on the line, and I’m sure that he has the best interest but the peculiarity of the country is not allowing him execute policies the way he wants.

As part of your Corporate Social Responsibility, how do you guide against the activities of wonder banks and other fradualent institutions masquerading in your name? 

First of all our major responsibility as an association is to ensure that our members have ethical standards and do banking professionally. We ensure that we conduct advocacy and training for our members, in line with this we also do public enlightenment to know the dos and don’ts of Microfinance Banks. We have been on continuous enlightenment, just like this interview I’m partaking in to ensure that the public don’t fall victim. It also the core duty of our members to be vigilant in their Community, if they see any so-called micro institution technically we call them non-Financial institutions that engage in contribution, but those that parade with suspicious moves we report to the CBN. If you enter into a genuine microfinance bank you see boldly displacement of CBN approval license for operation and NDIC sticker. The Non-micro Financial institutions are like cooperative society collecting contribution from their members.

Nigerians are groaning over the interest rate charges of some microfinance banks considering the hike in inflation. Is there a unified rate per deposit or withdraw?

You see these are privately owned institutions and our target market are people at the grassroots. If today I have a licence and I’m targeting the vulcanizers, nailcutters, barbers, hairdresser, shoemakers, among other petty businesses. So how much income are these people making to raise a pool of deposit with me that other people that need the money will come to assess it. The cost of assessing deposit is very high, and don’t forget we are business entities so whatsoever you are doing you must cover your costs. So there are few customers complaining that the rates are so high, but I will tell you that the most loyal customers are bottom of the pyramid ones because you as banker give him N10,000 you are transforming him and whatsoever you charge him that person is compelled to do the real business he or she wants to do. So if he makes profit he is ready to pay the high rate charges and deposit in his account too. So such don’t complain because we are there to support them. To the few customers that are complaining—there’s no free lunch in Nigeria.  What we are charging is the cost of forms, in the layman’s language banking is about getting from the surplus unit and giving to the deficit unit, so if it’s very expensive getting from the surplus units then you get to deficit unit, but you have to recover your cost assessing the deposit then add something to it as your overhead expenses. You know doing business in Nigeria is expensive talking about the poor electricity supply, infrastructures, taxation etc, so we have to factor all these then determine the charges. We’re not like commercial banks where CBN regulates their lending limit, ours is about service to customer and charges to them.

COVID-19 is resurfacing after the total lockdown, how is it affecting your businesses?

This pandemic has eventually affected everything in the world, then and there is restriction on movement. This challenge on health security has affected negatively on our activities as you can remember in 2020, there was complete lockdown. The only few people that were not affected were those that were carrying out their transactions on electronic transfers.