By Providence Obuh
“Until the economy of this country feels the impact of financial institutions in every nook and cranny of this economy, we are still far from where we are supposed to be.” President of the National Association of Microfinance Bank, NAMB, Mr. Valentine Whensu, said this in an exclusive interview with FV, highlighting issues around micro-financing activities in the country.
You have been the President of NAMB since 2014, what can you say are the challenges
There are so many challenges but we want to see the positive side of life and so, if we address the issue of funding with proper structure and conditions, the next challenge is access to finance from the customers, then access to market and financial infrastructure. There is a need for consistent and stable government policy and a need for collaboration between the federal government and Microfinance Banks (MfBs).
Where you have customers in semi-rural, rural, semi-urban and urban areas and after granting them facility to do their businesses, government just come up with a policy and destroy the market. Using adhoc institutions to address issues that have to do with the economically active poor when there is a regulated institution like MfBs, should be out of what the government is doing.
Sometimes, government will come up with one sovereign fund to address the issue of unemployment or any other and there are MfBs in which if such fund is channeled through them, you would see the impact. Setting up institution that will die with one government when that government leaves power should stop. Such adhoc committee increases the cost of governance. There are about 965 MfBs, with that, the government can go round this economy and touch lives.
Why is the N220 billion MSME development fund under accessed by MfBs
I would rather encourage our members to access this fund to improve economic activities. I think the Central Bank of Nigeria (CBN) in their developmental role has put these things together and we as stakeholders are also part of this set up. The fears of our members are that such funds coming on a single interest rate will distort the system.
The people that need this money are more than the fund involved. It might not be for the existing customers, it can go for new businesses in other areas so that it does not distort the interest rate we are talking about. Again, another challenge is the BVN that is not in our sub-sector, we are working with CBN and NIBSS. In a matter of months we will have BVN because we have signed an agreement.
Impact of recession
Recession has a ripple effect, if there is recession and people do not have work, there will not be economic activity, if there is recession where the country is dependent on one product and there is a problem with that product, it will affect all because it is a value chain. Recession affects everything in the economy, if it affects purchasing power, it will affect repayment capacity. If banks give out money and people cannot afford to pay back because of recession it will speak. It can affect any sub-system in a system and every ecosystem has a place that they all hinge unto.
Consolidation of MfBs
Consolidation has its merit and demerit, driving financial inclusion is a global topic in the world, if today we have over 40 per cent of Nigeria adult populace that are not banked and we want to drive financial inclusion and we are talking of bringing institutions together, it is by virtue of microfinance banks that some communities have been able to smell and know what is called banking activities. Consolidation increases the capital base, it has its own benefit, but because of the financial inclusion target, I would rather say, we should watch first before we embrace consolidation fully.
Why did MfBs not key into BVN innovation
The reason MfBs did not hook up with BVN was because of the cost involved, it is a huge investment. 40 per cent of our customers already have BVN, the remaining 60 per cent is what we will cater for when we start.
The number of mfbs operating in the country is huge, what is CBN doing?
There are processes for licencing a bank, before CBN licence any bank or increase the number, they already make provision for it. Yes it is an assiduous task and CBN has been effective in terms of regulating the system in managing MfBs. Nigeria would be said to be over-banked when we have solved the major problems confronting the development of this economy which is access to finance and access to market. Nigeria would be said to be over-banked when financial services is going on in every rural area in the economy.
We do not have that and so the number is still not enough and that is why we are advocating CBN that some of the unit mfbs should be allowed to have more than one or two branches, we are also advocating that they should promote and reduce the conditions on agent banking. Until the economy of this country feels the impact of financial institutions in every nook and cranny of this economy, we are still far from where we are supposed to be in terms of economic development.
The strong and weak MfBs in operation
There is nothing like strong or weak Nigeria, what is happening in our economy today is recession, whatever will make a country strong or weak depends on the economy. Every institution in this economy is surrounded by government policy. A favourable government policy will produce sound institution. We heard some banks are undercapitalised, that does not say they are not strong but it is the wave of the economy that is making it. For microfinance banks, that is the reason we have three categories.
We have a national licence whose capital base is N2billion, state capital base N100million and unit capital base N20million. Provided everybody is doing what they are supposed to be doing, they are strong in their own capacity. A lot of them attend capacity building organised from time to time and they ensure that their staffs attend so as to be capacitated. Provided citizens too who collect money from them for businesses use the money for business and pay back, you will have a sound financial institution.
I look forward to having a business relationship with the government of this country, so that we can address the issue of recession together, so that we can address the issue of access to finance which is a major issue, access to market for the rural farmers, access to information at the rural level. I look forward to an MfB that can bring solution to this economy, I look forward to a responsive customer who will collect loan and use it for business to develop this economy and pay back the loan as at when due.
Internet financial networking services such as MMM a big challenge to microfinance
Thank you very much for that, let me first warn Nigerians that another Umana Umana is coming, if they are doing that, there is nothing called network marketing in the financial system anywhere in the world, money system is not the same as the way they sell drugs. Banks give money out as loans and ensure the money comes in before they can even pay interest, we have seen it in the oil and gas and it almost wreck lives in this country. I advise Nigerians, if you have money go to either commercial banks or MfBs and deposit your money and if you want loan, go to them and collect loan, anything short of this will cause cry very soon.