Mr. Rogers Nwoke is the National President of the National Association of Microfinance Banks (NAMB). In this interview with the brtnews.ng team, the seasoned banker, financial analyst and Managing Director of HASAL Microfinance Bank Limited, speaks on sundry issues affecting micro-financing in Nigeria, particularly the sundry constraints militating against operational efficiency of MFBs and how the CBN, NAMB and Development Finance Institutions (DFIs) could collaborate to improve MFBs’ operations and transform them to the springboard of the nation’s financial inclusion drive. Excerpts:
With a few months into your tenure as the President of the National Association of Microfinance Banks (NAMB), what do you consider as major challenges facing your members generally in their efforts to consolidate their operations and satisfy customers?
First and foremost, we are set to overcome the challenges that the association faced in the past. I can boldly say that we have set up all the structures and functional organs of administration which is prerequisite for us to be able to face all the issues that microfinance has. Today, our biggest challenge is liquidity for our members. Most microfinance banks are struggling to survive and there is an imbalance and unlevel playing ground. More and more people are bringing money into the system and there are also government’s interventions. There is the MSMEs Development Fund, there is Bank of Industry (BoI) and Development Bank of Nigeria (DBN) has come around. You will find out that everybody focuses on the top MFBs whereas the lower MFBs are struggling to get or access funds. Given that no investor wants to put money where he is not sure, my major task right now is to start with a self-regulating framework that will help us to continue to sanitize the operations of our members in addition to what the Central Bank, NDIC, and other regulators are doing. But most important is the need to create an investment platform where investors will feel comfortable to put money and we can on-lend to our members. So, we are floating a Special Purpose Vehicle (SPV) to attract wholesale funds so that somebody who wants to put money in the banks will no longer concentrate on the big people because you can give money to the platform and we take the risk at giving such money to people. So, we can have this platform with the CBN for MSMEs Funds. We can approach BoI, we can approach DBN to say you can give us money which is managed by professionals fund managers. It is also going to be a platform where MFBs that have surplus can provide the surplus for the platform to lend and ensure such credits are secured. We want to create adequate liquidity in the MFB sub-sector. That is where our biggest challenge is now since our regulators are not comfortable giving us money and that imbalance is really affecting us. Nigerians who have liquidity would rather put it in a Deposit Money Bank and that really is where the problem is. Even micro depositors or clients are putting their money in deposit money banks that cannot support them. The irony of the system is that liquidity is channeled to the DMBs while the MFBs who give micro-credits do not get the deposits. So, that imbalance needs to be corrected before we can go forward.
“We want to create adequate liquidity in the MFB sub-sector. That is where our biggest challenge is now since our regulators are not comfortable giving us money and that imbalance is really affecting us. Nigerians who have liquidity would rather put it in a Deposit Money Bank and that really is where the problem is.”
Sir, how would you rate the disbursement of MSMEs Fund since the Central Bank of Nigeria created it to improve micro-financing in the country?
Basically, I think the CBN that currently manages the Fund is risk-averse and that is not good enough. Like every other form of lending, in the MSMEF you have a situation where some people you give money will not pay. The fact that one or two beneficiaries have defaulted is not a reason to shut down the Fund. I can tell you in the last nine to 10 months, no application from our members have been considered by the apex bank and no disbursement has been made. With that, I doubt if the Fund still exists. It is no longer available. When we met with the relevant department in the CBN, they said they were trying to restructure it to see how to review it and get it back. We agreed at that meeting that those who borrowed and were paying should be given money and that new applicants should be properly scrutinized. If you run a system where if you default you don’t get again that will sanitize the system and it becomes a key disciplinary tool. It is wrong to say because somebody defaulted you don’t want to give any other person. We would be wondering if the intention to make the Fund available in the first place has been given any consideration. We hope that the CBN will have a second look and ensure that all MSME Funds are released again because it will help to improve the liquidity position of the sector and we hope that it doesn’t stop.
“Basically, I think the CBN that currently manages the Fund is risk-averse and that is not good enough. Like every other form of lending, in the MSMEF you have a situation where some people you give money will not pay. The fact that one or two beneficiaries have defaulted is not a reason to shut down the Fund.”
In what ways will you say that the tax regime has impacted on your members?
I don’t think my members have a problem with company income tax, Value Added Tax and all that. The issue that not just MFBs but every other small business in this country has is the issue of multiple taxations. We know that in other climes when the economic situation becomes tough they introduce palliative measures to help businesses survive but what is happening here is that as the situation worsens, especially with oil revenue dwindling, the revenue authorities turned to small businesses as the major source of Internally Generated Revenue. So, today you have all manner of taxes and levies from the federal government, from state governments and from local governments. Banks are being shut down for not paying one levy or the other. How do you want somebody to pay you the penalty for running a generator when you have not given him public power supply? Why do you want to penalize somebody that has applied and incorporated businesses under the law again? Why do you want to charge somebody flat rate for environmental sanitation no matter the size of the business? For example, in the FCT it is common to see the tax people to charge an MFB occupying one shop in a plaza N35,000 and a small business that sells clothing and makes more money than the MFB is charged N5,000. The reason is that one is a bank. A microfinance bank with N20 million paid-up capital is called a bank and the branch of a bank that has N25 billion is also called a bank and they pay the same amount. These taxes and levies are targeted at raising revenue but they are killing small businesses. Our customers are crying and it has led to significant default in the system. I hope that the National Assembly will come out with appropriate legislation to streamline these things and ensure that revenues are collected from business people and not just arbitrarily such that any local government chairman cannot just wake up and hit you with a charge.
“So today, you have all manner of taxes and levies from the federal government, from state governments and from local governments. Banks are being shut down for not paying one levy or the other. How do you want somebody to pay you a penalty for running a generator when you have not given him public power supply?”
With the challenging times, what are your strategies the management of your bank is adopting to optimize its operations, return a profit to your shareholders and satisfy your customers?
In the case of HASAL Microfinance Bank, God has helped us. We have been profitable from inception. We started in 2008, we broke even in the first year. We have never recorded loss in any year. The economy has become extremely challenging in the last two years. Profit has dwindled but we have remained afloat and we will continue to put the best by ensuring that our investors do not have any reason to regret making their investment in the bank and this is by ensuring that first and foremost, we become prudent in the management of cost and we diversify our product base. We have always placed human capital as our number one priority. We have continued to train and retrain our people. So, we will enter the New Year with a lot more zeal and vigour targeting those segments of our market that are not properly served. Going with tailor-made products that will give them better service that will make them give us their patronage without hesitating. Our market is still deep and very untapped! We embraced technology from the inception and today, we are linked to the interbank settlement system platform, which enables us to make an instant payment. So, we are technologically equipped to meet the service needs of our customers and we will continue to employ all levels of digital financial services to ensure that we reach out to more customers and get many who are still excluded into the financial inclusion space.
Last year, you were on the verge of becoming a national MFB, what happened to that plan?
We believe that by the time our accounts for this year are audited and we cross the N2 billion mark, once that is approved we will approach the CBN and we pray that they give us that approval.