By Emeka Anaeto, Group Business Editor, Babajide Komolafe, Economy Editor & Peter Egwuatu

What is the historical profile of DavoDani (DD) Microfinance Bank and the major achievements of the bank in over a decade of operations?

DavoDani Microfinance Bank is the product of a buyover of an existing unit microfinance bank that was incorporated and licensed in 2008.

 However, in 2014 through a bold vision,  led by my humble self, I saw immense potential to invest in microfinance banking business and then acquired the unit license. At the time, the bank’s shareholders fund was impaired by high losses, with an eroded balance sheet of just N5.4 million.

After the acquisition, the first crucial step we took was injection of N20 million required to recapitalize the ailing Unit MFB and immediately we followed up with an additional investment which raised the capital base to #100m sufficient then to apply for conversion to a State operating license status.  After the recapitalization, we rebranded it and changed its name to Davo Dani Microfinance Bank(DDmfb). Thereafter, we applied to the CBN for conversion to state status and in May 2016, CBN graciously approved the upgrade. This set the stage for the new era of what has become known as DDmfb Ltd. 

The bank has a well-crafted vision, mission statement and core values of integrity, high ethical standards, reliability, and excellence as its navigator. With a commitment to excellence, sound corporate governance, and an unwavering focus on customer service, DDmfb began to see transformative results. In a relatively short span, the bank successfully turned around, expanding its capital base to N1 billion in fulfillment of the new capital regime introduced by CBN, a clear demonstration of its strong operational performance and prudent financial management. From the initial deficit of N5.4 million of the acquired unit MFB, we now stand strong with a balance sheet size of about N10 billion, an impressive testament to how far we’ve come. The negative Shareholder funds have now been turned around to about N4 billion. 

We take pride in the fact that DDmfb now boasts of 11 branches in strategic locations in Lagos state and a team of about 200 passionate and committed employees. The bank has not only grown in numbers but has cultivated a strong corporate culture rooted in integrity, innovation, and empowerment.  Indeed, the DDmfb has impacted lives, empowering individuals and corporate businesses to thrive, offering financial solutions to many MSMEs as well as the trust and confidence from all our stakeholders. 

Over the last two years, our audited accounts show consistent dividend payments to shareholders as well as other stakeholders in the value chain, confirming a stable growth trajectory. In February this year, the bank rebranded with a fresh identity and has since celebrated 10 years of empowering lives.

Our 10-year anniversary, held at the Marriott Hotel, Ikeja was a glorious occasion attended by our founding partners, Depositors, including representatives of the Bank of Industry, Development Bank of Nigeria, CBN, and many of our loyal customers.

What is your customer base, and how have deposits and loans grown over the years?

As of today, our gross deposit base has grown to well over N11b with a balance sheet size exceeding N5 billion, while our risk assets hover around the N10 billion mark.

We have a formidable Board of Directors and it’s a robust oversight and excellent executive management led by Mr. John Ologe, the Bank have kept healthy portfolio-at-risk (NPLs) at below the 5% regulatory prudential guidelines.

This is particularly commendable considering today’s challenging environment, where the Monetary Policy Rate (MPR) has climbed consistently and now stands at 27.5%, thereby increasing the cost of funds. 

In terms of customer base, the initial projection was to reach 0.5million customers a decade ago but we currently serve about 0.2 million customers. These customers include individuals, micro, medium, and SME entrepreneurs. Our long-term goal remains to reach one million customers in the coming few years.

 Some MfBs use harsh debt recovery tactics, such as harassing customers’ acquaintances. How does your bank handle loan recovery?

Recovery Strategies, like any other  strategy, adopted differ across microfinance banks, but at DavoDani, we are guided by our policies and the principle that “the customer is king.”

We first recognize that a bad customer today can become a good one tomorrow. That is why our approach is empathetic and persuasive. We meet with our customers to first seek to understand their challenges and the cause of their present predicament, particularly our long-term clients. We do this to unravel why they suddenly slip into default. In such cases, we restructure the facility to allow them to reorganize their businesses and start to fulfill their obligations.

For a few difficult cases, we remind them and lift the veil of the terms and conditions of the credit. Where dialogue fails, only then we involve the legal enforcement authorities for help as a last resort. As part of our financial advisories to customers, we always remind them that banks act as intermediaries: we take deposits from savers and lend to borrowers, and must be able to return those deposits on demand to those depositors. By our motto, DDmfb guarantees prosperity and financial freedom and never handles defaulting customers badly because we know that today’s defaulter may be tomorrow’s loyal partner.

Many MfBs have shut down over the years. What challenges have you faced, and how have you remained sustainable for more than a decade?

No business is without challenges. In the microfinance space, there are many challenges. Among the many challenges, staffing remains a critical one. As you know, human capital is an essential and most valuable asset in an organisation. There is a dearth of committed personnel in the Mfb industry. 

Secondly, funding is a major challenge. Sometime ago CBN created a N220 billion MSME support window for MfBs, but access to it and any other affordable funding window remains limited. Where some exist, the collateral requirements are very stringent above reach for on-lending solutions.  It is our fervent appeal to the Government to create an easily accessible fund to support the MSMEs’ employment programs and promote the financial inclusion program both at the Federal and the sub National level in the country. 

However, despite these challenges, we have remained strong, maintaining steady growth over the years. Our managers are trained on a consistent basis to  bring out the best in them. We don’t see challenges, we see opportunities, because in the midst of troubles there are opportunities waiting to be realised. That is why,  when 177 MfBs lost their licenses two years ago or so, DavoDani remained standing strong and tall. Challenges test our resilience, and each time we emerge stronger and successful. 

You mentioned funding challenges. How do you plan to overcome them?

The first step is recognizing the problem, which means it’s already halfway solved. As earlier mentioned, We have funding partners and continuously strengthened our relationships with them. Our staff responsible for mobilisation have been consistently motivated to do more and this is paying off. You know funding is the stock in trade of Banks, so it is always not enough.   

For instance, We started obtaining funding from  one of our funding partner in the sum of N168 million facility, but today we nurtured that relationship and our credit line has been expanded to over N1 billion from them with an excellent performance by both parties. Based on our current rating by  Agusto & Co and DataPro, we are well positioned and now approaching the capital market to raise N10 billion funding upon approval from our regulator. We are confident, by God’s grace, to succeed, because preparation meeting opportunities as we have done will produce good results.

Do you have plans to go public and list on the stock exchange?

For now, the Board has focused on our growth strategy, with the ultimate goal of becoming a regional bank. So, Going public has not been considered yet, though it remains a possibility in the future.

By regulation, MfBs focus on micro and nano businesses, which make up Nigeria’s informal sector. But there are concerns that many MfBs have shifted away from this role. What is your view?

We maintain a balanced portfolio. A larger proportion of our lending go to those at the bottom of the pyramid, the Nano, micro, Small and medium  businesses.

In 2016, we were giving loans as small as N50,000 to individuals and some were done  through group lending structures. However, the value of money has shifted this drastically. What was once considered a “big loan” then is now barely enough for small businesses, given the depreciation of the naira.

For instance, in 2014 the exchange rate was N150/$ to N189/$ just before the last Administration of Fmr Late President Muhammadu Buhari. Eight years later at the end when he handed over to the present government the exchange rate rose from N420/$ to about N1,550/$. This has completely altered what qualifies as funding volume sufficient for micro, small, or large business.

So, when people say MfBs are lending “too high volume to a single obligor,” we have forgotten that inflation and exchange rate has impacted seriously on the naira. What N5 million could do in 2014, now requires N20 million or more.

That said, we strictly follow regulatory guidelines. We don’t engage in large syndication loans or FX transactions, which we are not permitted for Mfbs. Our portfolio is well spread, covering micro and SME sectors, and remains aligned with financial inclusion goals. 

 Looking ahead, what are your five- to ten-year projections for DavoDani?

Our vision is clear. Before CBN’s recent recapitalization policy to deposit money Banks, we had projected to become a regional bank by 2026 which requires a N10 billion minimum capital base. The new requirements have raised the bar from N10 billion to N50 billion. So, we are in the thinking trenches. At the end  a positive way will emerge. We remain focused, for a winner doesn’t quit but keeps soldiering  on for greater testimonies. 

We are undeterred. We believe with preparation, strategy, and God’s guidance, we will achieve this. We draw inspiration from examples like Parallex Bank, which successfully transitioned from a microfinance bank to a full-fledged commercial bank. So, our goal has not changed;  to transform DavoDani into a regional bank and  beyond. We have packaged this vision and placed it before God, who ultimately enables success.