By Providence Emmanuel
The Managing Director, Alekun Microfinance Bank, MfB, Mr. Joshua Ukute, in this interview, spoke on various issues affecting the subsector, including the National Collateral Registry and the expected increase in capital base of MfBs
Do you see the National Collateral Registry making significant impact on the MfB sub sector?
The collateral registry introduced by the Central Bank of Nigeria, CBN, and the Federal Government is going to have a positive impact on the microfinance subsector because the business of microfinance is such that the people we serve are at the bottom of the pyramid and most of them do not have tangible collateral. In the past, most MfBs have had to lend against the goodwill of the borrowers, against their personal guarantees and most times against stocks and movable collateral. And because in Nigeria, tracking of collateral has been a challenge, lending against movable collateral has also been a challenge in this industry, hence the introduction of collateral registry. How this works is, once you have movable collateral that has economic value to you, you take it to the MfB and the MfB takes a charge against the collateral and lends against it. The collateral is therefore registered such that no other person, microfinance institution or other institution can lend against same collateral. Also disposal of such collateral is secured because anyone that buys such collateral would need to go and do a search of such collateral before he/she buys it. Once a charge is against such collateral, it cannot be sold and once MfBs and their practitioners know that movable collaterals are secured and cannot be easily sold or diverted. Then they can always lend against these movable material. Collateral registry would impact positively on the MfB subsector.
Do you agree with plans to raise minimum capital requirement for MfBs?
For the introduction of new capital requirement for MfBs to operate, well, it is still a rumour until it becomes reality. However, whether it is MfBs or Deposit Money Banks, DMB or any other business, we all know that the effect of inflation and foreign exchange would definitely affect business. So any business operating in Nigeria in the last five or 10 years should expect that the effect of inflation over the years and the foreign exchange instability would affect business. We are still waiting and if eventually the rumour becomes truth, we would know how to manage that.
Don’t you think confidence is about to be eroded?
I do not see the proposed recapitalization for the remodeling of the MfB subsector affecting confidence on the industry because our services would still go on, we would still serve our client. The confidence would not be eroded in any way.
Why is the sub sector still lacking enough funds to operate?
There are various intervention funds that are put in place by the different government agencies, such as the Micro, Small and Medium Enterprises Development Fund, MSMEDF, funds from the Bank of Industry, BoI, there are various intervention funds.
The reason why it seems as if these funds do not go round is because of some of the criteria for accessing the funds, but we can really say that for quite a couple of years, the criteria for accessing these funds from government agencies have been encouraging. Most government funds have been accessed by customers at the lower rung of the pyramid. Some have accessed, some have not. What matters is the adequacy of these funds. However, we expect that the management of these funds and the availability of the funds when needed by the MfBs who are the closest to the people that need these funds should be enhanced. If MfBs who are qualified for the funds have requested for the fund with every requirement in place, it is believed that they should get these funds on time, so that the end users too would be enhanced.
What are your expectations for the subsector?
We expect that businesses should pick up and also whatever affects the general economy affects the microfinance banks as a whole. So we expect that things should improve for the MfB subsector. We expect that once the MSMEs grow, the MfBs too would grow. I think there are good prospect in the months to come.