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Most MFIs lack sound credit products, Zattler

By Amaka Agwuegbo}
The high rate of closure of micro-finance institutions, MFIs, has been attributed to lack of sound credit products which has hindered the MFBs from disbursing loans.

Speaking at the one year anniversary celebration of AB Microfinance Bank, the chairman, Dr. Bernd Zattler, pointed out that though there are many MFIs in Lagos, they are not working in the market segment where AB-MFB works
“When you don’t have a good credit product to sell, it makes it difficult to grow a financial institution.

There are a lot of MFIs but as far as I understand, they work with completely different products and concepts, with many of them asking for voluntary savings but are very hesitant to grant loans.

“At AB-MFB, we grant loans on the basis of an analysis of the cash flow of the small enterprise and we do not require hard collateral, thereby giving us a very strong competitive advantage.

“Because these people can’t afford hard collateral like cars, houses or a fixed salary though they have micro-enterprises with incomes that are sometimes low or high, and we grant a loan based on these.”

Commenting on the Nigerian financial system, Zattler said “Beside product and management problems, the banks are also affected by the global financial crisis because they depend on loans from outside. AB-MFB doesn’t have refinancing problems because the Access Bank worldwide has a very good reputation and solvent shareholders that are always willing to inject new capital if the institution needs it.”

Zattler said that after 12 months of doing business in Nigeria, its capital base is currently within the neighbourhood of 5 million euros (N1,104,150,000), being money gotten from the shareholders.

“This is far beyond the 200,000 euros the Central Bank of Nigeria rules that a MFI must have, so we have over 25 times more than required. AB-MFB will continue to grow at a rate above 100 per cent a year, and soon, our portfolio would be so high that we would need additional share capital and I have no doubt that the current shareholders and possibly new shareholders would bring in this money.”

On what sets AB-MFB apart from the pack, the chairman pointed out that the bank offers a full range of products that meet the clients’ needs, including deposit products and payment services.

“We not only give loans, but also offer other products. Our concept is that of a house bank, meaning we are really a neighbourhood bank for our clients. You don’t offer them a single product but try to satisfy all their financial needs. Our clients don’t need sophisticated financial products because they are people of the lower income group. So we offer them products that they need.”

He said since their loan products are completely different from other MFIs and they don’t require hard collateral, all the loan officer needs is to visit the client to analyse his micro enterprise and also look at where the family lives, and if the client has the capacity – not collateral – to pay, the loan is granted.

“Our target is to disburse the loan within three days. In the developed countries, the clients would have to wait for weeks or months. But when our clients, who are small scale traders, have business opportunities where they can buy some products and sell off within a few days, they can’t wait for weeks or months. So what we have done is reduce the processing time to a few days. Also, we don’t ask for excessive documentation from our clients and this differentiates us from other MFIs.”

Comparing microfinancing in Nigeria to what is obtainable in other countries, Zattler said though there is a huge demand here, which is higher than in other countries due to our population, but the competition and what other MFIs offer is much more limited than in other African countries like Kenya, Tanzania, Madagascar and ‘the failed state’ Liberia, which they started operation in 10 months ago.

“These Nigerian MFIs work with different products, ask for voluntary savings and are very hesitant to disburse loans. Therefore, there is a lot of untapped demand that they can try to satisfy.”

AB Microfinance Bank Nigeria is a limited liability foreign-owned financial institution which is incorporated in Nigeria under the Companies and Allied Matters Act, Cap C20, LFN 2004 and regulated by the CBN as a microfinance bank.

Its shareholders are Access Microfinance Holding AG of Germany, Impulse Microfinance Investment Fund N.V. in Belgium, the African Development Bank, and the International Finance Corporation of the World Bank Group.
The bank operates microfinance banks in Tanzania, Madagascar, Azerbaijan, and Liberia, amongst others.


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