| There’s missing link between
bigger banks and microfinance banks– Mrs Kusamotu, Chairman,
Moneywise
By SEUN ADESIDA
Monday,
December 10, 2007
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Kusamotu
Photo: Sun News Publishing |
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Chief (Mrs) Abioye Kusamotu has carved a niche for herself
in the banking industry. From being a clerk in the former
National Bank, she rose to become an executive director and
a board member of Afribank Nigeria Plc. She also had a stint
with the defunct Savannah Bank Plc.
After leaving Savannah Bank, Mrs Kusamotu floated an investment
and consultancy firm known as Serena Investment Limited. She
was the managing director and chief executive officer of the
outfit. She also holds Securities and Exchange Commission’s
licence as a financial adviser which she runs as a savers
club.
Mrs Kusamotu is today the Chairman of Moneywise Microfinance
Bank, one of the recently licensed microfinance banks in the
country. She spoke with Daily Sun on the economy and the banking
and finance industry, the challenges in running a microfinance
bank and the way forward. Excerpts.
I am Chief (Mrs) Abioye Kusamotu, I am a banker. I have been
in banking since I left secondary school. I started as a clerk
in the former National Bank and later moved on to other banks
until I became an executive director in Afribank. I did not
just become an executive director overnight, I enrolled and
passed various professional examinations and by the grace
of God, I became an executive director. Banking was a carrier
I started in 1967 and I came into Afribank as a manager and
later became the credit manager of the bank. I retired from
the board of Afribank in 1995.
Those were the days the Federal Government was interested
in the four big banks: First Bank, United Bank for Africa,
Union Bank and Afribank, those were the big four. But things
have since changed. Then Afribank was the fourth largest as
at that time, which was when the government introduced the
Indigenization Decree. Government had about 40 per cent holding
in the four banks.
Because of the majority holding, government was able to transfer
directors, whether executive or not by fiat, that was how
I was transferred to defunct Savannah Bank. Quite frankly,
I didn’t like the transfer, so I retired from the board
of the bank but this was before it was scheduled for liquidation
by the regulatory authorities.
I didn’t so much like the position of the Savannah Bank
and that was what motivated my leaving the banking industry
in 1995. I worked with Savannah Bank for about two years before
I resigned. Immediately after resigning, I went into my private
business. I registered a company which I called Serene Investment
Limited; the company was principally into investments.
Generally, we were into investment and financial consultancy
services, I was running a lot of schemes, which involved small
savers clubs. The club mobilizes deposits from small depositors
in the neighbourhood. This was unlike what the wonder banks
were practising. I got my licence from the Securities and
Exchange Commission as a financial adviser, so that licence
was what I was using to run the savers club.
My qualification as a banker also motivated me into going
into this cooperative venture, we used the office for other
financial advisory services, especially groups that are interested
in forming a cooperative society, approached us and we guided
them into formation of new cooperatives and management of
existing ones. This led to the forming of a cooperative society,named
Unique Opebi Cooperative Society. I brought a number of women
and men together. We have in our mist, lawyers, estate agents,
bankers, executive business people. That cooperative society
today is able to lend among the members credit up to a maximum
of N2 million to a single member.
It was registered with the Ministry of Cooperative and Agriculture
of Lagos State. It is now a multipurpose cooperative venture.
As a multipurpose cooperative society, we can acquire land,
operate a fishpond, the fish from this pond is processed into
various varieties.
When we started the cooperative society, it was just with
12 members, now the membership has increased to 30 members.
With the intention of the government to assist people to create
wealth, we have been encouraging cooperative societies to
buy lands and company stocks as a group. This brought huge
returns to the cooperative members. My interest in cooperative
society is borne out of my banking experience. Today, the
investment business has metamorphosed into Moneywise Microfinance
Bank. I have gone on a study of microfinance in Harvard University
in the United States of America.
I have been exposed to a lot of microfinance developments
all over the world and I know how it is being practised in
Japan, India and China. What I studied I am able to practise
in Nigeria and that is what I have been doing since I returned
from the course recently.
Moneywise Microfinance Bank
The bank is only interested in making life better for Nigerians.
You can see that in this country, the major problem we are
battling with is poverty. Based on the passion I have for
banking all my life, coming out of banking means only one
thing for me, that is to go back straight to what I know how
to do best, which is banking, but now to better millions of
Nigerians who ordinarily would not have access to the kind
of finance that they need to transform their businesses.
So, with my credit management experience, I know how to mobilize
funds and how to allocate the resources at my disposal to
ventures that are productive which would bring facility back
with a little profit to the borrower and lender.
Banker entrepreneur
I am not just sitting in this office to grant credit, I am
equally an entrepreneur. The best way to do microfinance business
is to be involved in one entrepreneurial activity or the other
or how would you know how to advise and monitor the funds
you give out to other entrepreneurs. When you mobilize money
as somebody who wants to assist the society, you must be seen
to be a good example of using the same amount of money you
are giving to people.
Bigger banks and microfinance banks
There is a missing link between bigger banks and microfinance
banks. Bigger banks cannot understand what the entrepreneur
is going through, the banks are really not interested in what
the borrower is going through, they are only interested in
repaying the money borrowed from the bank. But at Moneywise,
we partner with our entrepreneurs, we know their pains and
we want them to grow with us, not just giving them the money
and waiting to confisticate their property. I will give you
a case of a group of women who came in here with the intention
of getting a credit facility. They needed money to repackage
their business for the Yuletide season, Easter and other coming
festive seasons. At the end of the day, I was able to give
them sound financial advice on what to do, to make more money
from their businesses.
The bank is going to give them money, but we have divided
them into groups of 10 women per group with N500,000, such
that each of them will be entitled to N50,000. We have put
strategies in place to make sure that the money is repaid
in the short term. We are not taking any security from them
but what we have extracted from them is a form of inter-guaranteeing
the loan among the groups of 10 members.
We make sure that they turn the money over twice in a month,
that way it is easy for them to repay the money. This is to
reduce the burden of interest that is attached to the facility
which increases if the facility is meant for long term. We
get our money at an expensive rate and we cannot afford to
keep such funds idle for a long time, we don’t lend
at the rate the bigger banks would lend. We get money from
the bigger banks for on-lending to small and micro scale entrepreneurs
and grass root borrowers.
The bank is interested in productive ventures, manufacturing,
agriculture and so many other areas. All of them have their
own repayment tenors, that is why we get close to them so
that we can learn about their challenges and how they can
be tackled. Their books must be scrutinized, so that they
don’t run into financial troubles.
How we operate
It is the wisdom in utilising money, like the adage that says
‘there is wisdom in small beginning’. If you are
earning N5,000 as your salary, we encourage our customers
to save N50 from that N5000 every month. The same N50 will
buy you a bottle of coke, by saving N50, you have denied yourself
a bottle of coke for a day in that month. The idea is to spend
less everyday, in a week that would be N250, in a month, N1,000
and in a year that will amount to N12, 000. This is less than
the annual per capital income of an average Nigerian.
Remember this person earns N5000 a month, there are people
who live on this amount because of the poverty in the land.
A graduate earning N25, 000 can afford to invest N5,000 in
a small business. The business definitely will translate to
more than that N25, 000 at the end of the month, if the business
is well managed. We are looking at the wisdom in saving small.
Microfinance banking in Nigeria
It is initially called Community Banks (CBs) before it was
upgraded to Microfinance Bank or MFBs. Remember that banking
is about intermediation, that is mobilising deposits from
surplus entity to be deployed into deficit productive ventures.
The difference between the bigger banks and Microfinance banks
is in the area of interest. While the bigger banks are looking
for big ticket investments, the MFBs are interested in the
small to micro-scale investments at the grassroots level.
It has now been accepted globally that microfinance financing
is the oil that lubricates the engine of growth within any
economy globally.
Especially in the developing countries where it is needed
to fight and wrestle the poor out of the clutches of poverty.
Based on this, the government and the CBN did so well in introducing
and implementing the policy.
Micro financing regulation
Micro financing regulation is now stronger than any other
time in Nigeria. This is because before now you can establish
any CB without any qualification provided you have the capital
base to establish one, but now you must have professional
bankers or accountants on the board of such banks. This was
unlike before when people just wake up and set up community
banks and before you know it, the bank is dead with peoples
life savings going down the drain
Challenges
MFBs are not well structured to be firmly established, this
is because the necessary infrastructural support needed to
survive is not there for the banks. The government can come
to the aid the new MFBs with a policy instrument that makes
provision for access to information communication technology
hardware like computers, Internet facilities and software
that are solely dedicated to microfinance operations. This
facility will be available on lease to the MFBs for a number
of years.
For the MFBs to quickly create the expected impact, it is
important for the government to look at ways of enhancing
the activities of the banks within the economic chain and
to become more effective in dispensing micro credits to the
small and medium scale borrowers. The volume of customers
we are attracting at the microfinance level is so huge that
we will need a comprehensive data bank on all the customers
and this means we have to install a software that can handle
such huge volume of customers and transactions.
This is more so because to touch the grassroots, it demands
our presence over a very wide area and we need the technology
to reduce the cost to income ratio due to excessive paper
work, which demands a lot of man-hours to put together. The
cost of running our cash centres is so high that you can imagine
how we can ever make profit, while looking at other overhead
costs of running the whole network of operations on a daily
basis.
What we are asking is not for government to give us free money
but technical support in the area I discussed above. We have
the capacity to pay back if the government could assist the
MFBs on these issues.
The second aspect is capacity building, for us to give out
loans without collateral is a high risk venture, and by the
statute establishing microfinance banks, we are not allowed
to take collateral from borrowers. We have to work with them,
go after them to ensure that we recoup our money. You will
need a lot of people to do this job and they must get paid
at the end of the day. That is why high cost of personnel
comes under this capacity building.
Banking and societal values
Our societal value is somewhat deficient and that accounts
for the way people get fooled and swindled. How can you give
money to a company and in three months you are paid 100 per
cent interest or more. My friends approached me when the issue
of wonder banks was taking the centre stage of financing in
Nigeria. I told those that consulted me that one, there is
no business that you can invest in that will yield 100 per
cent profit apart from landed property and some smart stocks
on the stock exchange, although that involves some shady deals,
so if you are not into any of these two, where are you getting
your profit from? It only shows that our societal value is
deficient. We are not interested in the source of the money
but we are interested in the money, we must be interested
in the source and the money.
Microfinance banking is not like the wonder banks, MFBs are
registered with the CBN and Nigerian Deposit Insurance Corporation
(NDIC), though nobody prays for it but if anything goes wrong
with any microfinance bank, the depositor still has access
to his money because he is insured to get the deposit back.
So, we should begin to train our children on how to choose
right value system, this is based on the recent developments,
before the value system collapses as in some other societies
of the world. We should train our children on the brighter
side of life, especially in the area of honesty, transparency,
hard work and dedication to duty. It pays off in life, no
matter how long, it surely pays. That is why at Moneywise,
these things we inculcate in our customers. You need all these
attributes to be able to handle money effectively.
Economy
Between 2003 and 2007, I have not seen any real change in
terms of practical determinants in the economy but based on
indices released by the monetary authority, inflation is going
down, but practical determinants like the living standards
of the average citizen in an economy is what is used to measure
the development or growth of any economy and not just the
abstract indices of inflation, rate of exchange and other
economic indices.
Anywhere in the world, whether you are in the developed, under
developed or developing economy, the standard of living is
of great importance. Are the people well sheltered, have access
to quality food, good clothing, social services and adequate
infrastructure to support the economy? I will say I have not
seen much of all these since 2003 and now.
Impact of MFBs on the economy
Within the last 12 months when the first licence was issued
to a microfinance bank, the industry is just about a year
old, so the impact is just building up, the effect may be
minimal now but it will be reflected when those areas that
have got the support of MFBs start producing and expanding.
The poverty problem the MFBs are trying to tackle has permeated
our society, that is why you see some people will take loans
and they don’t want to pay back. You will be surprised
that when you give any facility to the grassroots people they
pay you back, they work towards meeting the repayment schedule
but people with bigger business are the major defaulters.
Give this big business owners any facility, once they take
it, they decide not to pay back, small and micro business
owners pay back and you can see their businesses growing.
That is what informed our doing more businesses with the small
and micro-business owners than with the so called big enterprises.
Difficulty in accessing micro-credit from MFBs
There are two things about microfinancing, one, MFBs sell
credits, they don’t depend on deposit of customers,
MFBs get funds for micro financing from international donor
agencies, from individuals who are passionate about micro
financing. In other climes, MFBs get grants on a zero interest
rate agreement and with such funds the banks are able to on-lend
to the end users who are mostly small and micro businesses.
But the MFBs that are private sector driven like Moneywise
depend on deposits and investors to finance our activities.
To encourage our financiers, we must look for profit, because
if they don’t have profit in one and two years, they
will start to ask questions.
No security
And when we are disbursing the funds, the policy says no security,
a lot of things can go wrong after the money is given to the
borrower. It could be an act of God, accident, building collapse,
the person died and because of one of these reasons, they
can not pay, then it is the bank that bears the brunt of such
bad loans. So, the regulatory authorities and MFBs should
be careful about applications of no-security when granting
facilities to customers.
The issue of collateral must be properly addressed. We cannot
get money from bigger banks without collateral, if anything
happens, they just take my property to reclaim their money.
The problem with collateral also is the lack of adequate facility
to crosscheck the genuineness of most of the collaterals presented
and that was why it was removed as a necessity to grant loans
by MFBs. What we rely on mostly is the character of the borrower.
But character is not enough when the borrower defaults, the
result is that we underwrite such facility and that is additional
cost to our operation.
Collateral is not the issue but it is necessary, that is why
we are looking at concentrating on the grassroots people,
who don’t take much and we have to reach them in huge
number and work with them, which is costly. We make sure that
they make use of the money for the original purpose of procuring
the facility.
Managing Moneywise
We have many professionals working for us, we have a managing
director, the managing director actually does the day to day
running of the bank, I am more of a special adviser on financial
matters to the bank. There are occasions that I may step in,
this is purely administrative, to assist especially in the
area of granting or recovering a loan, this is because in
MFBs, credit is the issue. When you give out loans you must
manage it very well, so that you don’t lose the facility,
remember you are between the investors, depositors and borrowers.
Their positions change from time to time. The investors can
become the depositor and can change to become the borrower
and at the end of the day, profit must be declared, that is
why credit is the issue and it must be properly managed by
mangers of the bank.
We have credit granting limits for the managing director,
chairman and the board, I am linked online real-time with
the operations of the bank, I can easily see the daily operations
whenever I want any information. I have access to the data
bank of the bank, so I may not be physically present everyday
but I can monitor their operations from any location. We have
software dedicated to that purpose,
Advice
Microfinance is for people in the grassroots who are un-banked
and they are more in number, statistically about 80 per cent
of our society are un-banked. If you want to get any facility
you must be able to demonstrate commitment that you will be
able to pay back any credit facility given to you. First,
you can do this by having an account which is well funded,
introduce your business to the bank, and let the bank know
you very well. Your integrity is very important; who you are
is the real question. A lot of people hide, they won’t
give the correct information, when you get to where they claim
they are located, you can’t find them.
The people around you must know you, if I come to your business
premises people should be able to talk about your personality
and what you do and can’t do, and people should be able
to guarantee you, when all these are lacking, it becomes impossible
to get a credit facility from any microfinance bank.
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