By Providence Emmanuel

The Chairman of Coastline  Microfinance Bank, Dr. Evelyn Urhobo, in this interview, spoke on challenges confronting the microfinance bank, MFB, industry including rising incidence of loan default, which she attributed to economic pressure. Excerpt:

What is the cause of rising loan default among MfB Customers?

Loan recovery is a big challenge to the sub sector because if I look at the situation with my bank, Coastline Microfinance Bank, it is still unbelievable that we have over N100 million loans which can be classified as bad loan. It is really bad and a lot of reasons are responsible for this. We are servicing the micro sector of the economy; the petty traders who are mostly market women selling on the road side.

Naira 

We give them loan to operate and they are selling, the next thing is the local government or the environmental agents will come and dislodge them. That way, they keep moving around, they cannot settle down to do any meaningful trading to repay the loan. Again, the excruciating poverty is so much that when you give them loan, they can hardly generate income that would cover their overhead because suddenly their child is sick or they have to do one expenses or the other.

In the process they get enmeshed in loan default. I always say it that poor people pay their debt, they are always willing to pay but the economic pressure on them is so much that they default. The fact that loan recovery rate is so bad does not necessarily mean it is a failure in the sector. The economic pressure is too much on the poor that they need some relief for the micro sector to also grow so that their health, accommodation needs, among others are met for them to concentrate easily and turn the little money they have around by generating more income to cover their needs.

What is the way forward?  

I always talk about the Federal Government Social Investment Programme that is supposed to kick start the economy at the grass root level, they put a lot of money into the sector for the economic growth that we anticipate, but all the money is tied to the Bank of Industry with so much conditions attached. As long as it doesn’t touch the women at the grass root, nothing can really kick start or help their situation.

The Federal Government is putting N500 billion, great news, trace it to the grass root, it is not touching them. A lot of the money is tied to the Bank of Industry and there are so many conditions attached to it, including the issue of Bank Verification Number, BVN. How many women have accounts in banks that can have BVN. I think the government itself has to be more innovative as to how to drive the grass root and improve the poverty level because that is the bottom line and poverty is excruciating down there.

Why is the subsector not embracing e-payment?  

There is no doubt that the level of e-payment adoption is still very low because a lot of operators do not understand how it works. It would be good to sensitise the people more about the benefit to the sector because if we can really imbibe the e-payment culture, it will make life easier for our customers and we the banks.

What is your bank doing to bring banking to the grass root?  

We have so many programmes but I think the most innovative for now is the new software we just adopted, “Bank 1” that has made our services available everywhere in the country. With Bank 1 software, you can pay into our bank or withdraw; you can also have an ATM facility to make withdrawals in our bank; you can make withdrawals from your account from anywhere with your ATM. It is an interesting innovation that was introduced to make banking    get to the grassroot.

We do a lot of daily collections (Esusu) to assist our customers in terms of making it easier for them to pay their loan at the end of the month because they have saved towards that. We use to have a lot of fraud on the esusu collection because the collectors collect the money and don’t return it to the bank.

But with the software, as you collect the money, you can immediately credit the account from the shop where the withdrawal is being made and the customer will immediately receive an alert to confirm that her money has gone into the bank. That way, we have reduced the fraud in that sector but there are other loan for children school fees, home appliances and so many other products to make life easier for the people at the grassroot.

How is your bank responding to competition in Delta State

The market is huge and even the number of persons we are covering is still small compared to the bankable people in the environment. The issue of competition does not come to play because the basic thing to do is to go after your target audience. The main challenge is getting your customers to have a banking culture, so I don’t see competition, we are complementing ourselves in whatever we are doing and that is extending credit to the people at the grassroot which is the purpose of microfinance.