The directive of the Central Bank of Nigeria (CBN) on banks’ raising their loan portfolio to the real sector of the economy is a step in the right direction which will create a significant catalyst for economic growth and make funds available for the active economic sector to do more business.
According to the Managing Director, Accion Microfinance Bank Plc, Taiwo Joda, microfinance banks can help redistribute the funds to economically active sectors if funds are not concentrated on high profile individuals.
In an interview with Daily Sun, Joda highlights the bank’s focus on digitalisation and its impact on its customer base as well as its target before the end of 2019.
The major reason we focused on digital space is to improve the transaction experience of our customers, we have to deliver products and services they need and fit their lifestyles. That is to make our products easier to access, enabling self-service transactions over the phone and being able to initiate and conclude transactions in the comfort of their homes.
Our digital initiative focuses on providing our customers with the ability to get their loans in an automated manner, have access to savings accounts, make payments, conduct fund transfers and so many other services that could have initially required them to walk into a banking hall.
Speaking on our digital journey, since 2018 we introduced digital customer touch points to provide our customers with a platform that can enable them instantly access our products and services by a single click of a button on their phones. We announced *572# to allow customers, including those with feature phones, or those not enable to access internet to make transactions. We also introduced NUBAN numbers that allows our customers to make transfers from other banks into accounts held with Accion MfB. This significantly eases loan repayments and funding of savings accounts, besides making peer to peer cash transfers. Such developments simplify interbank movement of funds, without necessarily carrying cash.
Going forward, we will introduce a savings product that is 100 per cent digital and where customers can open accounts and make transactions on their own using their phones. This product’s brand name is SaveBrighta, which provides you with the opportunity of not only save, but depending on your monthly minimum balance you shall have access to hospitalization cash back and life insurance cover for yourself and members of your family. These additional benefits have been made possible together with our partners in the insurance space.
Leveraging digitalization opportunities
We have been able to make available digital technologies and interactions. We were the first Microfinance Bank to partner and introduce Automated Teller Machines (ATMs) in our various locations. We have also partnered with some of our corresponding banks to allow our customers conduct transactions on their teller booths using our Accion MfB ATM Cards, at a negotiated zero charge. We also have the USSD like i mentioned earlier, and a mobile app where customers can open accounts using their phones and thus allowing customers to perform cashless transactions very seamlessly.
We also have a good storage of the bank’s customers data. Its common knowledge that the Central Bank of Nigeria (CBN) has requested that a customer’s data should be stored for a minimum of 10 years and you know that this information is difficult to be stored on files and paper and takes up a lot of space. In this line we have introduced the electronic document management system (EDMS) that has helped us store customer data electronically. We have also worked on our backend processes to reduce manual collection of customer documents, by scanning all KYC required documents, and application forms, and process them electronically using the EDMS. The information is adequately backed up, and records are easily accessed.
We are also automating our system to allow automatic loan top-ups, for example, if you are an existing customer of Accion MfB and you have a loan running it shall become easier to make get a top up, as per terms and conditions we shall establish and build into the system. Also if you want a renewal of the loan, it shall become easier for you to get your loan renewed just by a simple click on your phone. At the moment, we are also improving on our Digital Field Application tablets, being used by our Account Officers to onboard customers. This shall be embedded with bluetooth printers, so when we collect money from customers for safe keeping or the repayment of their loans, they get a transaction alert or receipt immediately. This shall make reconciliation much easier and builds trust that we can be able to give them prompt services as well as validation for the money given to us. This shall still save our customers the costs and time of travel to the bank to make deposits while it strengthens our door to door service delivery.
We came up with this to take our physical touchpoints closer to where our customers live and work. This is in addition to our locations which are 83 in number across 12 states, where each of them could be quite a distance from some of our customers. But as you know, Nigeria is bigger than that and apart from Lagos, it’s a struggle to have branches in every local government in all other states. Banking agents, therefore, accelerate expansion in new states, with necessary incurring additional costs for setting up brick and mortar branches. At our agent locations, customers can open up accounts, make cash deposits and withdrawals, make account to account transfers, and pay bills. That is customers can do their bank transactions closer just in their backyards, through a registered banking agent of Accion who is a community member or neighbor that they know, and possibly meet on a daily basis. Because our focus has always been on uplifting the social and financial wellbeing of entrepreneurs and SMEs we know that they are always busy at their business locations on a daily basis, and thus we want to make it easier for them to access our products and services by establishing banking agents to deliver financial solutions on our behalf. We also have an agent banking loan meant for these agents to enable them balance the management of their businesses and liquidity challenges that arise from the conduct of agent banking
The impact has been in the area of huge scalability as we have been able to attract more customers. We have seen exponential growth of our customers over the years. In the first seven to eight years we had about 150,000 customers and by the end of 2018, this number had doubled. In the next three years, we plan to triple that figure and hope to move from the current amount of customers we have now to over 600,000 and that is what digitalization shall enable us do. It allows you to scale up very rapidly, and it allows customers to identify with an organization that is focused on them.
What we have done at Accion Ms B throughout the years is to identify opportunities that can help to enable the economically active Nigerians to have access to financial solutions through convenient and affordable means, so that they can grow their businesses and improve their livelihoods. We navigated the harsh economic realities by doing our business in manner that ensures our sustainability. For instance, prior to 2018, we had 62 outlets but we grew to 80 outlets because we wanted to reach more customers in 2018. Interestingly we also acquired a new head office that underscores our resolve that we here to stay to continue serving them and grow as their businesses grow. The company’s profit after tax (PAT) grew by 30 per cent from N810 million to N1.5 billion in 2018. Gross earnings also increased from N4.7 billion to N5.3 billion but what excited us the most was that 2018 was a year that gave us opportunity to increase the total number of loans we disbursed. For instance, in 2017, we disbursed about N57,980 million but in 2018, we disbursed about 79 per cent above the activities of 2017 and the total amount disbursed was N23 billion. Our portfolio grew from N7.6 billion to about N8 billion and to show that our customers continued believing in us, deposits grew from N2.4 billion to N2.8 billion in 2018.
Financial inclusion is a global agenda and from the bank’s point of view, we have tried to play our part in that space. Apart from driving our businesses to the grassroots, we have made deliberate strategic objectives to take our businesses to the Northern part of Nigeria. The EFinA report shows that the financial inclusion agenda, narrowing down to Nigeria, has not gained the required mileage in the North and so in reaction to that, we opened branches in Abuja and we have gone ahead to open a branch in Kano State and we intend to open more in Kano State. We have also evolved products that will serve the northern market more. At the moment, we are in 11 states including Abuja and driving our financial inclusion programme and we will continue in that trajectory to open up more locations in Nigeria.
CBN’s stance on lending
I think it is a positive development. Typically, 65 per cent of funds or savings to be given out as loans speaks more on the Deposit Money Banks (DMBs) because the MFBs are doing much higher than that figure. This is because MFBs are credit-led organisations. In Accion, you do not need to maintain your account for a specified period of time to be given a loan, instead once you open an account, you can get your loan, so to complement what the MFBs are doing, i think that is a wonderful gesture from the CBN. This would create a significant catalyst for economic growth, by making funds available for the active economic sector to be able to do more businesses. I think this directive is in the right direction and i would want to implore that some of those funds can also be channeled to the MFBs so that it is not about concentrating lending to a few high profile individuals but also redistributing funds to the economically active sectors at the bottom of the pyramid and I know that most MFBs are well oiled to serve that market.
Accion MFB’s listing on the floor of the Nigerian Stock Exchange (NSE) is a board and shareholders’ decision. But that is not to take away the huge opportunity that the capital market provides. So it is a good direction to take and we have previously had engagements with the NSE, the Securities and Exchange Commission (SEC) as well as the FMDQ Exchange and who have encouraged us to join the market. I can assure you that at the appropriate time, the board will take a right decision as to what direction we are going to take. Nonetheless, by the end of this year, Accion should have met the minimum requirements stated by the CBN, that is the N5 billion and so we are not under any pressure to raise funds to be able to meet the minimum requirement but that is not to throw away the opportunities the capital market will offer us but at the appropriate time, we will make the right decision.
Contribution to SMEs
We have done quite a number of SME lending and at the moment, the total SME funding is about 15 per cent of our total loan portfolio. Apart from giving loans to SMEs, we have also been able to advise them on how to go about their businesses. We have several testimonials of people who have been transformed over the years and we will continue to do that and also train and develop businesses. This year, we were able to host our SME customers who are widows by giving them health insurance coverage for the whole of 2018 and part of 2019. Further SME financing constitutes a significant part of our portfolio.