‘Credit search with credit bureaus driving quality of MFBs loans’
In its drive to promote financial inclusion among micro savers, Solid Allianze Microfinance Bank introduced several products and engaged customers in various saving schemes last year. Akintunde Adeniyi, managing director/CEO, who spoke with BusinessDay also highlighted the impact of credit bureau in micro lending. Excerpt:
Can you just tell us about the programme?
We are marking our end of year costumers program, and we have chosen today for our annual raffle draw. There is a specific product we have and we call it promo, where customers pay in a minimum of N50,000 for one year and once you meet that target of the golden number, you qualify for a raffle draw.
The raffle draw highest prize is a Bajaj bicycle, for the winner, the second raffle draw winner, a dispenser; the third raffle draw takes a microwave oven. It is specifically to appreciate our customers for their loyalty, for staying with us for the past one year and we have been doing this now for the past four years. It is also an avenue to introduce new products that the bank has as we go into the New Year 2018.
One of the products that we have introduced this year is the one for acquisition of landed properties. We have encouraged the costumers to acquire landed property by paying installmentally, all what the customers need to do is to open an account and save on daily basis or on a weekly or monthly basis depending on the arrangement that suites them.
We have selected landed properties with a global C of O and then we partner with an estate development company on where people can go and acquire the landed property.
Once they open the account, they make payment up to a minimum of half the total cost of the land and qualify to take over the property and start their development.
We are also trying to empower them so if there’s any need for them to get financial support to develop the property, we are supporting them in terms of micro housing credit to encourage them to build what their financial capacity can carry. We encourage them to build a prototype one bedroom self-contain, a prototype two bedroom self-contain and a maximum of a prototype three bedroom self-contain.
Another product we have introduced even though it’s been ongoing in the past but we are just renewing it, is the micro health. We discover that most of our customers do not have the financial strength to attend hospitals on their own. Majority of them find it difficult to pay to access medical health facility. We have partnered with a company called and we came up with a product called better health. This better health enables our customers to enroll under any hospital of their choice especially the ones within the proximity of their houses or various business offices. We have allowed them pay on installmental basis.
We have the bronze product, silver, gold and family. The minimum cover for that is N750,000, it enables them to access primary health service up to value of N750,000 for each enrolling of each of our customers.
How much will they be paying?
The total amount they will be paying is N800 per month which sums up to N9,600 per year and it enables them qualify for a health facility of N750,000 which includes minor operations. We have allowed for a six month repayment instead of a full one year which makes it N1,600 every month. If they are able to pay this amount for six months it enables them qualify to access medical facilities for up to a full year to the tune of N750,000. That’s the product that we are encouraging the customers to embark on and majority of them are coming onboard.
Another product we have launched is a technology product. We have discovered that the concept of Microfinance bank is to take banking to the doorsteps of customers. However we have discovered that you also need technology to drive those financial services. We develop a technology not with the usage of internet connection but it’s called the USSD code. They are required to transfer money from any bank to their account with us. What commercial banks are doing, we as Microfinance banks are doing same. Our customers can also buy airtime by dialling a specific code *540*065*amount on their phone provided it’s that same phone they used in registering that account. What we are doing is building those products that make customers to go to the commercial banks.
Another product we are introducing is the deployment of ATM cards, any customer who desires the use of an ATM can use it in withdrawing from any ATM machine of their choice.
Basically, today is a very interesting day for us, the crowd is massive and as we speak we have more than 800 persons in attendance of the program and our customer base is over 17000 that we have established within this short period of time. The bank is well over four years plus, by May 2018 the bank will clock five years.
By CBN categorisation of Microfinance Bank, are you running a state or unit Microfinance bank?
We are running a unit Microfinance bank even though we have the facilities to run a state Microfinance bank. We do not want to run a state Microfinance bank at this time because we want to evolve. We want our capacity to grow into the state Microfinance bank. Running a state Microfinance bank requires a whole lot of experience in terms of experience, technology and staff relationship, because if you expand yourself beyond your capacity management, it will expose you to certain significant threats. Our authorized capital is a hundred million which qualifies us to go into a state Microfinance but we do not want to because we want to grow in strength, establish a good customer relationship then on a need by need basis we would move into the stage of a state Microfinance bank.
This authorized capital of Microfinance bank that has been in existence since 2005, Do you see the need for an increase on that capital base right now from N20 million, is it enough to establish a unit Microfinance bank, N100 million for state and N1 billion for national Microfinance bank?
My position is the fact that the N20 million is not actually what the MFB is starting on, there’s no way you can start on a N20 million authorization, it’s not possible.
Even though it’s the minimum capital, you can’t start with N20 million because it’s absolutely not possible. The requirements to run a unit Microfinance bank with the way CBN designed is not what can be driven with N20 million. The requirements of any stable Microfinance bank includes a stable technology and you can’t get that with N20 million, you must have a sizeable space; there are other minimum requirements to operate a unit MFB. There are specific minimum numbers of customers and staff to run with, it’s absolutely impossible to run with those numbers of infrastructure with just N20 million.
In Kenya for example, majority of their rural MFB’s are still using manual, they are not using technology and certainly not driving on the height that CBN is requiring MFB’s to drive on. Some of them are running with a twenty by twenty size office and they are running them with minimal level of technology but here we are, in the requirements you must gave a stable technology, a standby power because you can’t run a technology without power. So the infrastructures that are required to run a Microfinance bank in Nigeria clearly shows that there’s no way you can do that with a N20 million capital requirement but if CBN lowers the infrastructural requirements, N20 million should be more than enough to run a Microfinance bank.
Another thing CBN needs to do is to segment it by putting it by region based in their developments. For instance, if you want to run a Microfinance bank in a developed state or region, a certain amount should be tagged to it because the amount a unit MFB will rent an office space in Lagos for example will be quite different from the amount that someone will rent it in Ibadan that is much more rural in terms of location. So someone in a rural area can comfortably run with a N20 million capital base.
What I saw while coming impressed me a great deal so am asking are there MFB’s that are doing such these days? I know that today’s economic situation is affecting some MFB’s, what’s the secret to your putting up such initiative, how are you able to attract such number of customers?
Largely, we started extremely very well because we knew where we are going to and what to do. Though there have been challenges, we still believe we have not done enough. The fundamental is that in the areas that we are, there are no too much competition for Solid Alliance Microfinance bank. Majority of the MFB’s we have in this our area are largely branches of the state and national MFB’s where the span of authority, responsibility, reporting, control, and decision making are expanded. In our case decisions are taken within a short span of time The decision makings are much more shorter because I deal directly with the customers. We usually fast track in terms of our processes with our loan booking and again the products that we have developed enables customers to come into the bank and run with us. For example this one we are doing on the promo savings account which requires you to save a minimum of N50,000 in one year and stand a chance to win varieties of prizes. We give souvenirs and people see that we are genuinely giving out those prizes, and become interested. The last one we conducted, a lot of people won generators and freezers and those items were given away.
Another thing we also do is save and win. If you save a minimum of N50,000 with us, we give you a phone immediately but you are going to keep your money with us for a minimum of six months which you won’t be able to withdraw. Some of this target savings enables us to plan for the loan that we are giving out to customers and we are largely partnered with thermocool, LG, and others that are supplying us their products on credit between 60 & 90 days (2&3months) that enables us to finance the asset leasing with the customer.
Above all we are actually in the market, the business is right in the centre of the market. As we speak, Shomolu, Bariga houses majority of the printers in Nigeria. Everybody comes to Shomolu to do one form of printing or the other, one form of advert or the other. In fact during the last Presidential election, we had a lot of presidential aspirants that bring vehicles and banners to get printed in Shomolu. We actually have a huge target for the customers that we are dealing with. We have done our own research before we came down to Shomolu Bariga. We can count the number of unit MFB’s that are resident here because they are very few. The concept of Microfinance bank is to put the face of the bank to the customer because that is what gives them the confidence especially when they get to see you everyday doing one activity or the other. We have a strategy whereby every three months we do what is called a road show, where we get the musician, music and we go out with our fliers combing the nooks and crannies of Shomolu displaying our products in such a way that it seems like a market meeting and we engage all the marketers, companies and the rest of them. We do that every quarter so four times in a year. So constantly we put our name in the ears of these our customers every week as well identify with particular market where we go to create awareness for the customers. So these are the things we are doing to put Solid Alliance in the face of the people to constantly remind them to do business with us. Above all this credit search, with credit bureau is significantly improving the qualities of the loans that the MFBs are running. We have seen several of the loss loans, and the abandoned loans, the borrowers come back after two or more years on their own volition to pay as another MFB asks them to come and collect a letter, they want to clear the debt they owe Solid Alliance. We collect the money and issue them a letter of discharge. The coming onboard of this credit bureau, the SDS, the CRC is also very extremely significant in driving the quality of the MFB. The MFB’s that knows what they are doing and knows their worth will be able to thrive in this business.
How many of your customers have come back for their discharge letters?
To give you an answer to that, I think they should be over a hundred and we have also had a lot of our customers whom we have asked to go and get their discharge letters too. It is mandatory for you to do a credit search on any loan you want to give out even as low as N10,000. It is one platform that CBN has provided for us. It is fantastic for those that are doing it because it is helping a lot. It’s so unique; you can search the names of people with addresses or phone numbers. Anyone that falls into it, it will bring out the name of the customer, the phone number and address for you to confirm and once you do the confirmation you can refuse giving them further loan. If you want to come to us as a customer, we ask you to go back to that particular MFB or commercial bank and settle your debt. Sometimes they say they are not indebted to any bank and we simply ask them to go and get a discharge letter from the said bank that signifies you are not indebted to them and the moment you can do that we can give you the loan.
So the credit bureau is significantly something that will help the MFB. What we are hoping that we would nail eventually is the issue of the unique identification for individuals. If we are able to get a unique identification for all citizens of this country that will be the end of fraud. It simply means that you can’t disappear into thin air without been found out. If we are able to get that it will significantly improve the quality of the loans because majority of the loans that the MFB’s are running with are without security. MFB’s are fully exposed and it’s the concept of the Microfinance bank because what we are saying is that these people are the unbanked sector of the economy and we want to bring them into the fold of the total financial inclusion and we should not give any barrier whatsoever that will take them away from having that opportunity.
Big Read |