By AKOMA CHINWEOKE
Micro finance banking is relatively new in Nigeria and is still lacking in human and institutional capacity, hence it’s impact on real sector development and  the grassroots, which is the main objective behind the policy, is minimal.

Ubani

In this interview, Mr. Uche Ubani, managing director, Peniel Microfinance Bank speaks  on what the country stands to gain by increasing the capacity of the MFBs to deepen their services to the active poor.

One year after, what is your view on the Sanusi led banking reform?

My personal view is that based on the basis of what is happening world wide in terms of the global economic crisis and considering our peculiarities, how it started affecting the country’s economy and the status of the banks prior to his assumption of office, his reform agenda is well intentioned. But one thing we must have at the back of our mind is that each manager has his own style and strategy of achieving a given objective.

The drastic reforms, corporate governance structure and internal goings- on in the banks needed some changes but the approach depends on the manager. We cannot for example compare Sanusi with Soludo because they all have different styles of approaching a specific task and that is where the style of Sanusi is quite different because he came into the job from the position of an insider. Having been in the industry for many years as an operator, he is very conversant with the activities in the industry.

Having that background gave him an advantage over someone that relied on  second hand information. So, on the basis of his in-depth knowledge of the sector, he took some actions which were  unprecedented in the history of banking in Nigeria.

He dissolved the boards  and managements  of ailing banks and put   new ones in place. Of course, in every action , there is always a fallout whether positive or negative but on the basis of the industry as we see it, I would say that it was a bold and courageous action on the part of the CBN governor. However,  it sent fear down the spine of all operators in the banking industry and shut down credit flow.  Banks that have money refused to lend because they are afraid that if they do and if things go wrong, they may be held accountable.

That automatically affected the economy as a whole. Having observed these short negative consequences of their action, the CBN has  also started to come up with some remedial actions.

First of all, they have bailed out the banks by providing funds to those that were critically under capitalized with new management to guarantee that both locally and internationally, those banks would never renege on any commitment they have made.

That   gave a   semblance of confidence but that again had a negative impact in the sense that it made the banking public to become afraid of putting their money in the banks. Up till today most of those rescued banks  are still finding it terribly difficult to retain their customers. Not only did it affect the main banks, but it had a boomerang effect on the fledging micro finance industry that was barely two years old in the market.

In total the CBN governor has done well. At  least he has kept inflation and exchange rate at a reasonable stability, despite the depletion of the external reserve.

There are indications that the CBN might increase the minimum paid up capital of unit and state micro finance banks by 500 percent.  Given the state of the economy,  how prepared are the operators for the new hurdle?

Well, right from  inception when the policy was introduced in 2005 and took off in 2007, the minimum  share capital for unit micro finance banks was 20million and most of the community banks that converted to MFBs , prior to that time had already exceeded 20million as their share capital.

For example, in 2006, when I took over Oriade Community Bank , they already had a share capital of 80 million and authorized capital of 100 million. As at today, as business is growing  we have already increased our authorized capital to 200 million and that amount is fully paid on.

We are on  the verge of increasing it to 500 million. So, any living organism  should know that as the  business expands, there is the need for more investment in that business. At the peak of the crisis, suggestions were made to the CBN to increase the share capital or compel the micro finance banks to merge in form of consolidation.

So, it is a regulatory thing, if  anyone cannot meet up with whatever they come up with,.the alternate thing is for them to either sell the bank, get it acquired by another MFB,  merge or they die a natural death. It is  necessary because many today have eroded their share capital through bad loans and defaults by customers and if they don’t recapitalize, there is no way they can remain in business. So, it is a necessity that each micro-finance bank must face.

How would you measure the impact of MFB in helping to reduce poverty among the economic active poor?
I think that the objective of MFBs was that it is a commercial enterprise aimed at empowering the active poor in the economy.

To a  large extent, the industry achieved that goal from 2007 to 2008. It was the economic crisis that truncated the drive. I can tell you our customer base is basically the artisans, traders, petty traders etc. When I took over the running of Oriade Community Bank, we had less than 5,000 accounts in our  books  but as at today we have over 13, 000 customers in our book. Of this magnitude, more than 90 percent of them have never banked with any bank before and as at 2009 we had over 300million naira in credit portfolio. Of this number, people that collected loans of between N10,000 to N500,000 were those that have never obtained any form of loan from any bank before.