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Microfinance banks should not be competing with commercial banks — MD Capstone MfB

In this interview, Managing Director/CEO, Capstone Microfinance Bank Limited, Mrs. Beatrice Oluwasina, spoke on the performance of the subsector vis-a-vis loan repayment and the likely impact of the proposed Microfinance Development Company. Excerpt:

By Providence Emmanuel

EFCC, banks

WHAT is the experience of Capstone MfB in the subsector?

We have been in operation since 11 years and two months; we started as a unit MfB but we are now state licensed. Hopefully, we have investors coming in so we would remain state licensed. We have empowered a lot of people including widows and we have different products. We are on the Lagos Island and our impact has been felt.

What is your assessment of the performance of the microfinance subsector in 2019?

Activities in the subsector have been very slow and this is because we are not outside the economy. The economy has been a bit slow generally because of the elections; everybody is trying to stabilize and the recapitalization drive also. A lot of MfBs do not know whether they are going to survive the recapitalization or not, and all these contributed to the slowdown in the subsector. Notwithstanding, a lot of us have learned that we need to think outside the box and see what will help retain our customers. We cannot compete with the commercial banks, they are into retail, and our interest rate cannot compete with them. There are some services that some of us are rendering that is not allowing the Small and Medium Enterprises, SMEs to stay with us, so we are going beyond financial services to other services; such as teaching them to keep their books because most of them cannot afford accountants. Things like this have kept them with us instead of going to the commercial banks.

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What is your assessment of loan repayment in industry vis-a-vis the challenge of nonperforming loans?

For this year, I am sure a lot of microfinance banks would have single digit Portfolio at Risk, PAR. In our case, our PAR is less than the five percent, which is the regulatory threshold. The reason is that we have Bank Verification Number, BVN, so all those serial loan defaulters do not come again and with the BVN we actually know the real names of those borrowing money and of course we are registered with the three Credit Bureaus. So once a customer’s  name is uploaded by the Credit Bureau with any MfB or commercial bank, there is no way such a customer can escape because we would check his/her integrity from the credit register before giving out loan. If you have defaulted somewhere in the past, it shows that you are a bad customer and we would not give you loan. The BVN has really helped.

In your view,  how would the proposed Microfinance Development Company  impact the industry?

It has just started, it has not really taken off yet so I don’t think I can comment on that. But if it is well done, the impact would be huge. Fortunately, with the recapitalization that the Central Bank of Nigeria, CBN has set, by next year, they too would become lender of last resort to MfBs, the same way they do to the commercial banks. What NAMB is doing is good but if the CBN’s own takes off, that would be of great help to us because the moment we recapitalize according to the CBN, we can come to CBN as our bank of last resort to borrow money from them.

What are your expectations for the industry?

Our expectation is that we should drive professionalism, with the assistance of our regulatory bodies and the Chartered Institute of Bankers of Nigeria, CIBN; we hope to get to a stage where most of our management staff would all be certified microfinance operators. Our sector is totally different from commercial banks, there is so much for us to do; we have micro housing; micro insurance. We shouldn’t compete with commercial banks because we have a lot to do, if we do what we are doing, we would still maintain our customers. The services we give to the customers and the SMEs, the commercial banks cannot give that. There is a bright future for MfBs and it would really help the financial inclusion that the government is clamouring for.

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