By Olayinka Ajayi
Austin Efeurhobo is the founding Managing Director of Think Finance, a micro-finance bank he registered in the United Kingdom, UK, before relocating to Nigeria to help drive Small and Medium Enterprises, SMEs, as the engine of economic growth.
In this interview, Efeurhobo stresses the need for the authorities to reconsider what he tagged as the “astronomical increase in the capital base of micro-finance banks from N2 million to N200million” among other issues.
How do you describe the happenings in the informal sector in 2019?
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2019 was a good year although there were hiccups. We operated more of a credit economy. We saw many other people also penetrating the micro-finance space; we saw a lot of lending companies coming on board. People had easy access to loan, we saw new entrants in the market, and we saw a strong monopoly as exercised by Interswitch. So, basically, 2019 was a busy year. We saw foreign direct investment of about $400 million in October and November alone. The bulk of that money was channel to the financial service industry. We saw a lot of competition and we are going to experience more in 2020.
How did Think Finance start?
It’s a bit complicated, backed with a long time vision. But most people who knew me 20 years ago may not be surprised because of my humble and industrious beginning. My mother was a petty trader in the popular Agboju Market in Amuwo-Odofin, Lagos and I used to help her to sell in the market. Anytime my mother went to the popular Lusada Market in Ogun State, they used my name to identify her goods as Mama Austin. I started hawking at a very young age.
Going by the kind of environment I grew up in Festac Town, what was common among us was the zeal to survive. While some had the motivation to travel out of the country, others’ motive was just to gain admission into the university and get a good job thereafter. While some took to music, others went into artisanship. Along the line something happened that basically transformed my life. That was when I gave my life to Christ. That got me focus and it really helped me, keeping me away from many social vices like gambling, fighting from school to school; that was common at that time.
That brought me back to my vision. However, I had to sit for JAMB five consecutive times and, in the process of trying to gain admission, I did other minor jobs including in a dry cleaning firm for two years. After my fifth JAMB, I secured admission into Obafemi Awolowo University, OAU, to study accounting.
Because of my street life, which I acquired via hawking and academic prowess, I emerged the class governor of my department. As a result of being someone who had tasted both sides of life, I was even taking other students in tutorials. I later became the President of Accounting Students Association and graduated with 2nd Class Upper Division. While waiting for the NYSC, I had the opportunity of working in a finance company.
Describe your national service years
I was hoping to be posted to Lagos but I was posted to Benue. And because of the little experience I had working in a financial company, I felt I could also do something there. So, I went to the State Director of NYSC, I shared my idea about how youth corps members could set aside part of our monthly stipend and use it to support market women and also invest in the capital. He didn’t really understand what I was saying but he was just convinced to stake his trust in me. And because of that, I was posted to the state capital, Makurdi, so that I could monitor the funds. We eventually started as a Community Development Service, CDS, group and I was the one managing the funds.
It required technical skills. So when we met every Friday, I would enlighten them about capital market. With that, some people were left other CDS to join ours and it was really growing. In fact, other CDS were inviting me to speak to them on investment. Some of them never knew that I was a youth corps member. I later registered a company, Green Field Edge Partners, together with my friends and my course mate in the university who were also NYSC members in Benue. Then we gave the money to a cooperative society which gave it to market women. There was a time we visited the market women to know how well they were doing. At the end of the day we got about N1.5 million.
Some corps members in Kaduna and Lagos who knew my pedigree heard that I was doing something in Benue and were also paying into our account. The Intercontinental Bank manager in Makurdi called to find out what was happening and how other people were paying into our account. At the end of our service year, I was given an award for the brilliant idea because it was completely different from what corps members were doing. Even some corps members said our project was better than the NYSC Foundation. While they forced corps members to pay for the NYSC Foundation, they joined ours willingly because they enjoyed it. They wanted me to continue, but, after my service year, if you wanted to mobilize money, you needed to have license. So it was not something I could do anymore.
So I needed to further my education and I applied and got admission into the University of Edinburg, U.K, where I did my master’s in finance and investment. In a bid to fulfil my vision, I registered in the U.K Think Finance Services Limited with an eye still on the Nigerian market. After some years, I said it was time to return to Nigeria. But my family didn’t want me to come back to Nigeria on the grounds that were no jobs. Nevertheless I came back to Nigeria.
I was scared but there was something pushing me to pursue my vision. I had my resident permit in the U.K; so I told myself that if I returned to Nigeria and things get bad, I will return to the U.K. I also did a PhD proposal with an eye on a lecturer’s job if things didn’t go as planned in Nigeria. Eventually I got married to someone who had been part of my vision and my classmate who served in Lagos.
How I did you realise the Think Finance idea?
I left Nigeria in 2009 and came back to Nigeria in April 2012. The idea I implemented in the NYSC I believed I could still implement it. And the only way I could implement it was through a micro finance bank. I looked at the capital outlay, it was really huge. So, I started the same company I had registered in the U.K, Think Finance. I was just doing the local contribution (Ajo) for petty traders and market women. I was going to the market, collecting the money myself and the market women urged me to employ people that would help in collecting the money. I said to myself that if I didn’t legitimize it, government might come after me. So, I went to inquire on how to go about it at the CBN and they told me to do application and I got the regulatory guidelines.
At that time, starting a micro finance bank required N20 million as capital. I had the passion, I had the vision, idea and I was qualified. Eventually my classmate and family members, who knew what I did in my NYSC days, came to say they wanted to be part of it. That is how I was able to raise the money. Today, we are among the strongest micro finance banks in Nigeria. But this is just the beginning because where we are going to transform into a commercial bank.
How have you been able to support SMEs?
The essence of any micro finance bank is to support the banked and the unbanked. SMEs fall within these categories because commercial banks don’t really finance this segment of the market. The truth is that economic growth is always driven by SMEs and that is why the CBN came up with the regulatory requirement for micro-finance banks but most of the people who got licenses still see themselves operating as commercial banks. We are completely different because we have passion for SMEs. Since we have started, we have disbursed over N350 million to about 2,300 SMEs. Based on what we have been able to do, we got award from the African Child Foundation as the SMEs Support Bank of the Year.
Is the Nigerian government doing enough to support SMEs?
Government has been coming up with SMEs funds and they are above average. But the issue has been in terms of institutional structure and how we resolve disputes, estimated billing as well as double taxation. The Buhari administration is doing its best in terms of supporting the informal sector through banks but the issue is that accessibility of funds is low because SME operators can’t the criteria to raise funds.
If your cost of operation is high, how do you pay back? And due to lack of regular power supply, bad roads and double taxation, when SME operators get these funds, they believe it’s their share of the government money. I think what government should do is to address these infrastructural deficits and also strengthen their institutional frame work. So these are basically the strong bottlenecks that are strangulating SMEs in Nigeria.
What are the challenges of running a micro-finance bank?
One of the major challenges is the gap between policy makers and operators. Recently, the capital base of micro-finance banks was increased from N2 million to N200 million which is really crazy. That, I think, is a wrong signal.
That policy was not properly thought-out. Yes, we know that the capital base of micro-finance banks should be increased when you are look at inflation compared to the initial focus. But that astronomical increase from N2million to N200million for mini micro-finance banks is just too high and for the state from N100million to N1billion. Basically, you are going to attract people into that sector that are not really coming to focus on SMEs and the unbanked. So, it is going to be a mixed bag because you don’t expect somebody to come with N200million and focus solely on market women and petty traders.
What effect would the increase have on the nation’s economy?
Basically the effect is going to be disastrous because the focus would not be on SMEs again; the focus would now be on the same people commercial banks are facing. So, the inclusion of unbanked in the main stream of the economy would not be achieved because, with your N200million, the urge to look for the man who requires N30, 000, N50, 000 would not be there again. So there would not be proper distribution of income.
Micro-finance banks have done a lot to help the economy in the sense that people who ordinarily did not have access to finance now have access. Without micro finance banks, employment rate in Nigeria would have hit the rooftop. Now it is double digits, it would have been higher than that and this has supported the gross domestic product GDP of the economy. If they want the financial inclusion of the banked and the unbanked, I think that policy should be looked at again.
What is your projection for 2020?
This year, the micro finance sector is going to experience some transformation as a result of the revolution brought about by Fintechs. Most micro finance banks want technology to drive their products. In 2020, we are going to see micro-finance banks playing in similar space where commercial banks and Fintechs are also playing.
We intend to introduce automated teller cards and mobile payments, we intend to make our bank a one-stop shop where our customers can pay utility bills using their accounts with us. And we should be expect series of mergers and acquisitions because of the astronomical increase in the capital base of micro-finance banks. The truth is that not all micro-finance banks would be able to meet up with the capital base requirement. All these boil down to the fact that customers are still going to be better off.