The Managing Director, Imowo Microfinance Bank, MfB, Ijebu Ode, Ogun State, Mr. Ajayi Abiodun, in this interview, said that the survival of a bank is largely determined by its financial performance which requires good management and corporate governance, rather than capital base. He also highlighted other issues affecting the sub sector and its operations.
By Providence Emmanuel
DO you think the MfBs really need recapitalization as required by the CBN?
I can say categorically that it is not recapitalisation that matter, what matters is the performance of each bank, aside that, they should allow banks to grow organically, not by forcing them to recapitalize. Some banks are in the rural area, they don’t need more than N20 million to perform. It is those banks that their capital has been eroded through bad debt that want the Central Bank of Nigeria, CBN to enforce recapitalisation. Some Unit MfBs do not have N50 million required by the CBN.
Even the capital they have, they are yet to utilize it through lending to the active poor in the rural area because they do not give loans beyond N20, 000 or N30, 000. If they are forced to recapitalize with N50 million and they manage to, who will take it from them? Some commercial banks that recapitalized with N25 billion, they have been distressed. Even if they raise their money to N100 billion instead of N25 billion, they will die if the management and corporate governance is not existing. It is not recapitalization that matters; it is the performance of each bank. They should allow them to grow organically.
When I came to my bank, our total share capital was below N5 million, but today, the total share capital is over N170 million. When the CBN first came with recapitalization of Unit MfBs, they raised it to N200 million, assuming we were unable to raise such and they collapse our bank, it is going to have a negative effect on the populace. What matters is the performance of each bank.
How is your bank impacting the lives of people in Ogun state?
That is very good; the most important aspect of how we have been helping them is by giving them micro loan. Some of the civil servants have small businesses they do after work, so we give them soft loan to boost their business. Some need money to buy car, fridge, among others. We buy for them and when their salary comes, we take our money from deductions. It could be from a period of six months to one year.
Aside from that, some get developmental loan to raise their personal building, we give them money when they want to start foundation, after that we give them again to raise the building. We can’t give them N15 million at a go, it is called developmental loan; we give them as they develop their building gradually. Some take about six years to complete but we can’t give them loan for more than one year. After paying for one year, then they can apply for another one.
The salaries of civil servants in Ogun state comes regularly, unlike other states where they owe six months, but in Ogun state, we don’t have problem giving loan to civil servants because we deduct from their monthly salary. But for the market women, we devise means of monitoring and securing their loans, we tell them to produce two civil servants that can guarantee them on their salary and that I can tell you, is working very well, when they allow civil servants to give them cheque as collateral, the civil servant would also monitor the facility being granted, since they secured it with their cheque.
They know the implication of issuing dud cheque. We don’t take collateral from federal because we don’t have power over that. We always carry out proper assessment of the customer to ensure they have the capacity to pay back the money. Those who do not have capacity to pay back, we don’t give them much money and that is what we call active poor.
Are you in support of the inhuman methods use by some MfBs to recover loan from defaulters?
Some banks are practicing it, it is too bad, that is what they call “Gbo omu le lantern” (breast on lantern). I have heard it but I have never seen it. There is nothing wrong with using subtle pressure to recover loan, (empty threat) but it is unfair to lock up customers shop or apply some inhuman treatment on a customer without any court judgment. The subtle pressure does work some times if it is applied.