By Sunday Ani
My people perish for the lack of knowledge, says The Holy Bible. The same could also be said for the collapse of many microfinance banks in the country.
According to Mr. Adegoke Adegbami, the Managing Director/Chief Executive Officer (MD/CEO) of Mainstreet Bank Microfinance Bank (MfB) Limited, also said knowledge gap was largely responsible for the failure of a number of mfbs in the country.
In this chat, he explained that even at the regulators level, many examiners were using commercial bank orientation to examine microfinance banks, which was wrong.
Microfinance in Nigeria
I think we need to basically go back to the definition of microfinance. Microfinance means providing financial services to the small and low income earners. But when you look at the microfinance banks, there are some in the SME group and those involved in petty markets and so on. So it depends on what you want to focus on. For a microfinance bank, you can’t attend to all of them. For instance, if you want to tackle the issue of poverty, are you going to get everybody on the street to come and do business with you? Some of them will come but they cannot really save their money, some of them are actually involved with one small business or the other. These are the ones we call the active ones because they are actively involved with something so they are the ones we target; the ones we believe if it’s effectively done they will bring their money to save in the bank and they will also be requiring small loans and also employ someone else. They also get their businesses better structured, better planned and maybe need to expand when it gets better with time into a limited liability company.
The 2008 global economic meltdown drew a lot of issues and challenges. There was the challenge of people losing their jobs and then looking for something to do. Microfinance provided an opportunity where they could get some money. Those people that lost their jobs, for example, could start some small scale businesses. Each of them can also provide jobs for two or three other people. There were also people that lost their jobs in the commercial banks and saw microfinance as the natural alternative. Shortly before the meltdown, there was the banking consolidation in Nigeria. Consolidation reduced the number of commercial banks in Nigeria from 82 to about 25. Many people in the money deposit banking space lost their jobs in 2006 and 2007 due to reorganisation, rightsizing and downsizing following the banking consolidation. The next thing was for those people to get jobs in the emerging microfinance space. In a typical Nigerian way, many of these people believed that microfinance means the smaller version of commercial bank. They believed the commercial banking knowledge they had was enough to run microfinance business. They were wrong. At the regulators level, many of the examiners were using their commercial bank orientation to examine microfinance banks.
The microfinance market operates on a different ideology and methodology. It is very dangerous to use the strict commercial bank knowledge and methodology to run a microfinance bank. The market is different. The people we are dealing with; their lifestyle and their needs are different from that of an average commercial bank customer. For instance, there was this belief that you can use the microfinance bank license to mobilise cheap deposit to either fund the micro credit programme or other businesses. The truth is that microfinance bank cannot even become self-funding in the first two to three years. You are dealing with a net deficit section of the market and so you must get money to bring into that section of the market. Therefore, the knowledge gap was largely responsible for the failure of a number of microfinance banks. People from commercial bank background also had this problem of wanting to keep their expensive lifestyle. So they put on microfinance bank the kind of expenses that are unsustainable. Things have changed today. The operators and regulators know better now. Even our customers now know better. They know that microfinance loan is not a share of national cake. CBN has organised and sponsored certification training for operators. For you to play a management role in a microfinance bank in Nigeria now, you must be certified. There are also training programmes for the non-executive directors of microfinance banks.
We must also remember that a number of microfinance banks have done well over time, particularly those that took the issue of capacity building very seriously. Mainstreet Bank Microfinance is one of those that have done well. Here, we don’t joke with the issues of training and planning.
We have over 80,000 customers. Some of them are on loans while others merely save with us.
Our customers are broadly divided into two categories. We have those in the rural areas and those in the semi-urban areas. In Lagos, for example, the places where we operate are what you can call semi-urban. If you look at the outskirts of the Island, the mainland and also the rural areas, these are places that are densely populated, so we are targeting them. Even most of our customers who are doing business in the major markets on the Island are people who reside in the outskirts of Lagos, such as Ikorodu, Abule Egba, Ikotun, Ejigbo and so on.
There is the issue of capacity building, which is being addressed by the day. There is also the issue of funding. Microfinance needs stable funding both from the private, commercial and development sources. Poor credit culture in our society is also a major problem. I also think that microfinance in Nigeria is currently being strictly regulated compared with what obtains in many East African, Southern African and Asian countries. We know that the regulator’s objective is in response to the nature of our own society. But we should get to a point where some small scale microfinance banks can operate just like the modern forms of our typical Alajo or Esusu system. Those people will not need N20 million to start their businesses, particularly in our remote villages. Their activities would be guided by other business related parts of our laws, pending when they will grow to the level of strict regulation. At that point, they will be compelled to list for regulation. Also, lack of public infrastructure makes the business of microfinance to be very expensive. Microfinance is naturally expensive because of its small loan sizes and the labour intensive nature. But Nigerian environment is more challenging because of the absence of public utilities.
We can say we are doing Corporate Social Responsibility (CSR). Microfinance itself has a social aim, so that is why Mainstreet Bank MFB is doing microfinance. But basically, what we do by way of what you call corporate social responsibility are things like providing capacity building opportunities for customers, especially the group loans to customers. Before we give them, we educate the people and teach them the basic skills like book keeping. Let’s assume that you did a business of N50,000 and you got N55,000; N5,000 is your profit. Profit means you have to meet up all other expenses like transportation and the likes. But we have also been involved with some social activities too in form of training our staff and also organising some get-together for members of staff to interact and have fun and also network. We give them trainings that are not necessarily needed for the job but for their personal development. Our leadership disposition fuel our passion for success and the setting up of people and also training them on wealth creation, entrepreneurship mentoring and on capacity building while creating awareness for young entrepreneurs to start their own business. We do some health awareness campaigns in our organisation. We have also organised retirement training for some of our consumer loan customers.
First of all, I am a church person. I watch films sometimes, like the local movies on Africa Magic channel. I also listen to music. I enjoy reading and travelling. I also like political and economic analysis.
As a child, I wanted to be a lawyer or a pastor. I still love those callings today. I am a leader in the church and I believe one of these days, I will go fully into evangelical work. I am also a 500 level Law student now. I love being a teacher and a coach and I do both as my passion today. I have been into motivational speech since 2006. I have published a number of books since 2007. In 2017, I published two books and I plan to publish four in 2018. I also have interest in agriculture and I intend to pursue it further.
Hard work pays. Young people must have value for knowledge. Readers are leaders; they must be ready to read extensively and intensively. One problem of our continent today is that we have a system that throws up people who are never prepared for leadership. Young people must prepare for leadership. Leadership is more than talent or gift. It can be learnt, it can be cultivated. They must value human lives above money and ego. Finally, young people should develop interest in entrepreneurship. It holds the solution to the major part of our economic problems. Also, in this dispensation, young people must learn to think business, entrepreneurship, innovation and value creation.