IT Executive, Hackman Microfinance Bank Limited, Mr. Emeka Victor, in this interview said that technology would further enhance the activities of Microfinance Banks, MfBs, and eliminate categorisation in the sub sector.
By Providence Emmanuel
WHY are Unit MfBs facing more challenges than State and National MFBs?
There are limitations to Unit MfBs, regulatory wise there are limitations. The latest is the new capital structure. With this, I see a lot of Unit MfBs folding up but to save face and remain in business, we would be seeing about two or three of them trying to merge. That would also have its own limitations, because they have to agree on a particular location, each MfB has its different setting. There are some MfBs that are strictly for women owned businesses. The vision of such MfBs cannot tally with others who deal with high networth individuals.
The cost of technology is still very high. If you have a proper banking solution, you would be paying the chunk of the current capital on credible banking system, you would have been coughing up to N10 or N15 million for the credible service provider. The limitations are so much and in all that, if there is a way we can leverage on a very good technology which the Central Bank of Nigeria, CBN, is currently trying to provide right now, we can leverage on good technology and support, not really in terms of financial support or bailout from CBN but adequate support would aid business models and it would be good for the sub sector.
Would you say that MfB subsector would lose people’s confidence due to some of these challenges, especially, recapitalisation?
We would lose out but it would build a future for the sub sector, especially the Unit MfBs, which I think that the CBN should look at. There are places where you see the Unit MfBs, especially in the rural areas you don’t see a commercial bank in those areas. The banks are not ready to commit staff in places like that especially outside Lagos. Even in the states capital there are no much commercial banks, you would see MfBs and what we call community banks in the past, which are now the Unit MfBs. However, there is a good ground for partnership.
Even between Unit MfBs, there are some MfBs who play on the same field with the commercial banks because they are doing agency banking and doing some sort of partnerships. Partnerships can occur irrespective of merger, though there would be due diligence and undergoing regulatory procedures with the CBN and other bodies but the partnerships can really work out.
An instance is that, if you may have a very viable Unit MfB who have a service and may want to reach out to a particular community, instead of going to set up an agent, I could find a neighbouring offer in that area with other institution it could be a finance house or a microfinance bank that I can render my services to.
We can increase our reach, technology is meant to help the system, with technology there shouldn’t be a difference between a Unit, State or National MfB.
What are the solutions you suggest?
We can leverage on partnerships. There is really a good ground and opportunity in some communities and localities which may be good for businesses to thrive. I may want to disburse loan and expand my horizon. For instance, we are based in Lagos, we may want to expand to Jigawa State, I could partner with a Unit MfB over there after I have done due diligence to ensure that they are credible, on services I offer which they do not and use their staff to get the knowledge of the area.
It would be on agreement but it goes beyond competition in the Unit MfB but building a good synergy. So I would be riding on the good will of that Unit MfB and they would be relying on my own services to bring something on board.
The interesting thing now is that there are a lot of products that so many service providers have, but they need to run it through a financial institution, FI to gain ground. That is an area MfBs can plug in. Some guys can come and say I want to give micro loans to students based on traffic on their phones. But they cannot thrive without running it through a FI to cover them. There are lots of opportunities and partnerships are key.