The Managing Director, Lifegate Microfinance Bank, Mr. Stephen Adekunle, in this interview, speaks on how economic challenges are impacting the operations of Microfinance Banks (MfBs), stressing that the industry is likely to post lower returns this year.

By Providence Emmanuel

HOW is the sub sector coping with the economic crisis in the country?

The economy has not been friendly, things have been very tough and prices are going up while income is coming down. I only pray the year ends well because even the landlords have doubled their rent, due to the Land Use charge by the Lagos State government.

Bank

As they are getting the bill they are also increasing our rent too, there is nothing we can do because we cannot pack out and abandon our business. It’s only by faith that businesses would make profit this year with what is going on. A lot of default is likely to come up with what we are seeing and it is a very dicey situation.

The customers want to apply for loan, but because their businesses are not doing well, it is difficult to come around to take loan. Most of them actually want to take loan but they cannot because when you look at what they have, compared to what they want to take, you cannot give them because of the ability to pay back.

Do you think providing more funding channels would solve the problem?

Intervention fund cannot solve any problem for now. It is only an improvement in the economy that would solve the problem, it is increase in economic activities and better economy, the economy is struggling. It is only people with income that would buy products. It is not an issue of borrowing more but the economy is improving.

Going forward, what do you think we should expect?

There should be employment, so that people can have money to buy and then businesses can improve. If not, it would be the same problem;  if 50 percent of the working population does not have work to do, where will they get money to buy products? Unless the government pumps in money to revive the whole economy so that there would be income and then, people can afford what they want to buy.

I feel it more because I am involved and also because of the generality of the people we are working with. The MfBs feel the impact the most compared to commercial banks who are dealing with corporate organisations who are bigger and have more muscle. But we are dealing with the low income earners in which little things affect them more than people that have facility to absorb shock. They don’t have facility and any little thing will mean their end and no ability to come back.

So what are you advising?

The only thing is that the MfBs have to manage what they have and the available customers and assist them. Most of the time, we visit customers in their shops to do business support by advising and encouraging them to ensure they remain on their feet. Like I said earlier, there is likely to be lower income this year because cost is increasing, income is decreasing, we are preparing for a lower bottom-line for this year.

The Central Bank needs to show some understanding. They should look at the reality of things because following the rules to the latter sometimes does not work, it make things difficult. Sometimes they bring sanctions, you are making losses and somebody is still sanctioning you.

They should try and bend backward to accommodate what is going on. They need to advise the government correctly. They should map out strategy that would solve all these identified problems and the economy would be better for it.