Managing Director, Ric Microfinance Bank Limited, who is also the Chairman, Lagos State Chapter of the National Association of Microfinance Banks, NAMBLag, Mr. Omololu Fatunbi, in this interview,  shares his views on the proposed increase in capital base of Microfinance Banks (MfBs), as well as how MfBs  are coping with the challenging economic situation.
Excerpt:

By Providence Emmanuel

WHAT is your assessment of   MfBs response to the economic situation of the country?

Microfinance banking is a financial business, it is a question of you identifying your market and knowing where to play and then keeping yourself within the confines of regulatory requirements. The economic situation as it is, does not stop anyone from doing business, it is now left for operators to look out for their business and see which one is doable or the good ones and then do due diligence such as Know-Your-Customers and the Business, KYCB. With this, you can leverage on the good customers. If you look at the economy and say it is so bad, then, there would be no business to do. So within the challenges of the business environment, the MfBs would have one or two things to do. First is to cultivate your customers, the good ones and manage them very well so that you can retain their loyalty and patronage.

Do you support plans to raise capital requirement for MfBs?

The idea is a lofty one because if equity is increased and of cause with more money, failure rate would reduce. The thing is, the increase should be reasonable; it should not be something that would throw MfBs out of business. The reality is that, for the industry to move forward as it is today, there is a need to have some increase in capital and it is not only for the Unit MfBs. It is for the different categories of MfBs and not Unit MfBs alone, I am aware that there is a mindset to increase share capital for the MfBs.

Do you think it is right for Unit MfBs and National MfBs to be regulated equally?

Regulation is regulation, there is a policy manual as set by the Central Bank of Nigeria, CBN. It regulates the Unit MfBs just the same way it regulates the National and State MfBs. So, there is no sacred cow in this circumstance. What is expected is that the standard would be met by every MfB. I don’t think the regulators have been unfair on Unit MfBs. It is a standard; there are minimum requirements that we ought to meet for the industry to move on.

How is Collateral Registry impacting the sub-sector?

It is a welcome development, it is for you to register your asset so that no other person would go and pledge it.

Collateral registry

And if it were to be pledged, your interest would be noted in that asset. It is a good one for the MfBs.

Why are MfBs not embracing it yet?

Trainings have been organised by the collateral registry and even the CBN to impress on MfBs to key into the initiative and I am sure quite a number of MfBs are trying to link up with the collateral registry.

How is Collateral Registry going to reduce the negative effect of loan default?

It may and it will because you register the asset and if you cannot pay, that asset would be disposed. It will reduce default, this is because, once you register the asset, you have given it to the bank and of cause, the bank can realize the assets. It may not reduce default; perhaps, it would reduce non payment of obligations. It is applicable to everybody, both big and small borrowers. Even if it is your generator, air conditioner or anything that can be pledged, it is an asset.

What are your expectations going forward?

With the various efforts by the regulators and hopefully with the economy that would likely improve, we expect that the economy would improve in this 2018. We expect some progress within the sub sector, but again, money needs to be injected into the system. If economy improves, it would have effect on the MfBs. We are the real sector    giving financial inclusion to the people. We are the closest to the grassroot and so once the economy improves, the MfBs would improve also.