The National President of Micro Finance Banks of Nigeria, Mr. Austin Nwoko says MFBs are struggling to survive due to liquidity challenges. In this interview, he bares his mind on other challenges confronting the MFBs sub sector.
What is the challenge for your members?
First and foremost, we have set mechanisms in place to overcome the challenges that the association faced in the past. I can boldly say that we have set up all the structure and functional organs of administration which is prerequisite for us to be able to face all the issues that Micro Finance Banks has.
And today, our biggest issue is liquidity for our members. Most Micro Finance Banks are struggling to survive and there is also the issue of big quality and unlevel playing ground.
More and more people are bringing money into the system and there is government interventions also. You have the MSMEs Development Fund, there is Bank of Industry (BoI), 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 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 sanitise the operations of our members in addition to what NDIC, and other regulators are doing. But most importantly it is 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 to attract wholesale funds so that somebody who wants to put money in the bank will no longer concentrate on the big people because you can give money to the platform and we take the risk at giving money to people. We 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 funds managers. It is also going to be a platform where MFBs that have surplus can go to. We want to create adequate liquidity in the sector. Our biggest challenge is that 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 (DMB) rather than an MFB that support them. Even micro clients are putting their money in banks that cannot support them, so the liquidity is channeled to banks do not give micro credits and those who give micro credit do not get the deposits. That is the imbalance that needs to be corrected.
What have you observed from the disbursemnt of MSME Fund that has slowed down their operation?
Basically, I think the CBN that currently manages the Fund is risk averse themselves and that is not good enough. Like every other lending, you have a situation that some people that you give money will not pay. The fact that one or two beneficiaries have defaulted is not a reason to shutdown the Fund. I can tell you in the last 9-10 months, no application from our members have been considered and no disbursement has been made. With that I doubt if the Fund still exist. 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 they can lend and get it back. We agreed at that meeting that those who borrowed and were paying should be given money. New people who are coming should be properly scrutinised. If you run a system where if you default you don’t get again that will sanitise the system and it becomes a key disciplinary tool. Its wrong to say because somebody defaulted you don’t want to give any other person. We would be wondering the intention to make the Fund available in the first place. 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.
How has tax regime 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 that of multiple taxation. We know that in other climes when the economic situation becomes tough they introduce palliative measures to help businesses survive but what is not happening in Nigeria. Here, as the situation worsen especially with oil revenue dwindling they turned to small businesses as the source of Internally Generated Revenue (IGR). Today, you have all manner of taxes and levies from the federal government, from state governments and from local governments. Banks are being shutdown for not paying one thing 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. Why do you want to penalise somebody that has applied and incorporated businesses under the law again. Why do you want to charge somebody flatrate for environmental sanitation no matter the size of the business. MFBs occupying one shop in a plaza you charge him N35,000. In the same FCT for example, and a small business that sells clothing and makes more money than the MFB and you charge him N50,000. And the reason is that; one is a bank. A Micro Finance Bank with N20 million 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 so that any local government chairman cannot just wake up and hit you with a charge.
With the challenging times, what are your strategies to optimise your operation and return profit to your shareholders as well as satisfy your customers?
In the case of HASAL MFB, 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 in particular. 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 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, 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 zest and vigour targeting those segment of our market that are not properly served.
Going with tailor-made products that they get better service that will make them give you their patronage without hesitating. Our market is still deep and very untapped! We embraced technology from the inception and today we are enabled on the interbank settlement system platform enabling instant payment.
And so we are technologically equipped to meet the service needs of our customers and we 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 nationalised MFB, what happened?
We believe that by the time our accounts for this year are edited and we cross the N2 billion mark, once that is approved we will approach the CBN and pray that they five us that approval.
