Operators’ lack of knowledge is ruining microfinancing —Oyekanmi
From National Daily, Nigeria -
Microfinance banks in the country have been generating much controversy of late following the report from the Central Bank of Nigeria that most microfinance banks (MFBs) have misplaced their priorities, culminating in their insolvency and distress. In this interview, Prince Dele Oyekanmi, the Managing Director of MoneyWise Microfinance Bank informs that poor knowledge on the part of the operators is responsible for the sad development. He spoke with JONATHAN OLAJIDE.
What purposes were set by the Central Bank of Nigeria for microfinance banks (MFBs) to pursue at their inauguration?
The microfinance bank sector was purposely set up to fill the gap that existed in the commercial banking operations in Nigeria. The creation of MFBs in the country was targeted at addressing the needs of the active poor in the society― those who hitherto never had access to banking but were keeping their money at home. It was basically meant to take banking to people in rural areas because if you had the chance of visiting rural parts some years ago, you would discover that most commercial banks were not present there. And also because Nigeria has a larger population in rural segment, the Central Bank of Nigeria decided that the rural people should not be excluded from banking opportunities. So, the CBN felt that the rural populace needed to be helped in areas of depositing their money in safe hands and accessing credit facilities, which were enjoyed by people in urban areas.
Since their inauguration, MFBs have been able to extend banking to those who were very hard to reach by commercial banks and avail them all the benefits that come with banking. Similar to what the commercial banks do, MFBs also collect deposits from members of the society and extend credits like loans and overdraft to them. They don’t just collect deposits and save them in their faults, they give them out as loans and create risk assets with them.
What is your assessment of MFBs so far?
So far, I think MFBs have been able to modify all the traditional methods of banking, like esusu and ajo, that we used to have in the country. At present, these traditional methods of collecting money are now done more creditably as regulated by CBN and insured by the Nigerian Insurance Deposit Corporation (NDIC). The situation is no longer what it used to be in the past when one person would collect deposits from people and spend them on his or her personal needs. So, if any group of people operating as a microfinance bank misuses people’s deposits, the CBN and the NDIC are there to protect those depositors and ensure that they get their hard-earned money back.
However, I think the situation has not being too bad for us. Naturally when you start a project there must be some teaching problems. There have been some problems, but I want to equally say that regulatory authorities have taken the right steps by addressing those problems in form of capacity building which has been made available to all MFBs operators. There is nobody in the top hierarchy of MFBs operators now that has not been adequately trained by CBN. It is my hope that those who have not been trained will be trained subsequently, but majority has been trained. Every managing director and two other top management staff of each MFBs In the country have gone through what the CBN calls Certification Programme, which has enabled us to know the nitty-gritty of microfinance banking. I believe the idea has set the right tone for microfinancing in Nigeria.
Recently, the CBN listed 121 MFBs whose licences were revoked for insolvency and distress. Where do you think the problems came from?
One of the problems facing microfinance banking is what I talked about earlier on regarding lack of capacity building or knowledge gap. It is not possible for a person to give what he does not have or teach what he knows nothing about. It is unfortunate that training on microfinancing was not there at the beginning; people who started as operators were not trained. Then again, most of the people who came into the microfinance sub-sector came from commercial banking background. Having come with that experience, they were living a flamboyant life and many of them failed to get their acts right.
They failed to match their resources properly by investing customers’ short-term deposits in long-term assets. Many of them invested in fixed assets as against risk assets, which was to earn them income. The fixed assets were not generating income for them after they bought vehicles and built houses as office complex just to compete with commercial banks. That was not necessary because the model for microfinance is not about having gigantic structures. So, there were misplacement of priorities and mismatch of funds as a result of lack of capacity building and knowledge gap.
As the managing director of MoneyWise Microfinance Bank, what would you itemize to be the core values of microfinancing?
I believe that our core value must be a legacy that endures and financially touches the lives of people. How do we do this? We must learn to cut our coat according to our cloth, to do things right according to policy and to do microfinancing the way microfinancing is done. Though I am from commercial banking background, I have learnt that if one is setting up any venture, one must do a thorough study of it. Before I ventured into microfinance banking I had learnt to do a feasibility study of it and got to know that there is difference between commercial banking and microfinancing. So when I came into microfinancing, I had to drop the toga of commercial banking and put on the garment of microfinancing.
Also, touching lives of people’s lives is another core value we must try to pursue. We don’t collect money from people and invest it in assets that will enhance our personal aggrandizement. Rather, we invest customers’ deposits in areas that will lead to continued sustainability of the bank and add value to lives of the people.