Adegoke Elijah Adegbami, a financial management consultant who is also one of the pioneers in microfinance bank management in Nigeria is currently the Managing Director/Chief Executive, Mainstreet Bank Microfinance Bank Limited, the only surviving arm of the defunct Skye Bank Plc. In this interview he speaks on the many challenges besetting microfinance banks especially during Coronavirus and the way forward. Excerpts:
What exactly is your bank doing in response to this COVID 19?
Thank you very much for your question. By mid-March 2020 when the number of Coronavirus cases in Nigeria and level of awareness were still very low, we started taking steps to ensure safety of our staff and customers. Early in March, we provided hand sanitisers, face masks and hand gloves for all our staff. They had to go around with bottles of hand sanitisers. At the same time, we provided machine hand sanitisers across all our branches. In fact, we are co-tenants in our Head Office building at Broad Street. The building has six floors of which we occupy two. We provided machine hand sanitisers for the entire building. We believe solving the pandemic problem requires collective effort. Safety of your neighbour is an important part of your own safety. At the same time, we embarked on awareness programme for all our staff and customers about COVID-19. We produced banners across our branches providing necessary information about the pandemic and how to stay safe. We also shared the same information via emails and a summary format was sent to all our customers by texts. We have more than 100,000 customers in our books. It may also interest you to know that we stopped about 70% of our staff (particularly those that have to come to office via public transport and those whose duties involve coming very close to customers inside the busy markets) from coming to office about two weeks before government declared lockdown. We were not used to remote working but we had to start it for the safety of our staff. We directed our customers to our e-channels. Since March 2020, we have served our customers via e-channels and our internal activities are done largely via remote platforms or working from home. Even now that there is gradual easing, many of our staff are still working from home. Of course, a major aspect of our business requires physical contacts with our customers and their businesses; we are doing our best to adapt to the new realities.
In addition, National Association of Microfinance Banks, Lagos Chapter donated food stuff to the indigents, many of who are microfinance banks’ customers. We did the donation through the Lagos Sate Government. The chapter also sponsored radio campaigns to create awareness among our customers about Coronavirus and ways to ensure individual and community safety. We sponsored another radio jingle in support of the frontline men and women in the fight against Coronavirus. As a member of the Association, our bank contributed money to those efforts. I also did personal donation to the Association for that purpose.
As our staff begin to resume office, we provide sanitisers and face masks for all our staff. We have equally ordered face masks for distribution to some of our customers. In front of all our branches, we are providing water taps and soaps for hand washing for staff, customers and non customers. We also continue to provide updated information to all our customers and staff on how to keep safe during this pandemic.
Our Board has also approved three months moratorium on loan repayment for our customers whose businesses are directly affected by COVID-19 and resulted in their inability to repay their loan as and when due. What this means is that they can have extension of up to three months in their loan repayment. It is not a loan forgiveness and it is not an interest waiver. They will still pay their loans. But they have the repayment spread for additional three months. We will also not apply any penalties on those three months, provided you don’t have history of default before COVID-19. To qualify, a customer has to formally request for that extension and he must keep to that extended period of repayment, otherwise penalty begins to apply after those three months. If a customer desired to pay down earlier than the agreed extended period, he/she is qualified for a new loan immediately at a reduced interest rate. This extension is however applicable to only those whose loan defaults were caused by the pandemic and the lockdown. There are customers who have been in default before the pandemic and the lockdown. Those people are loan defaulters and penalties apply on their default in line with the loan contracts. I must also tell you that we have some customers who are still paying their loans despite the lockdown. Those people are automatically qualified for new loans at reduced interest rates. You know it takes strength of character to repay loans even at this difficult time. And good character is a currency in the business world.
There are customers who complain that Microfinance Banks are harassing them to pay their loans despite the lockdown and the fact that CBN has given moratorium on loan repayment. What is your take?
Well, I read some of those publications, in one of the national dailies where they wrote as if there is only one microfinance bank in this country. There was another one in an online news medium where they accused a particular MfB of forcing customers to repay their loans. Generally, that is not something I like to talk about. But if you want me to comment, I will say one or two things. The one by the online news medium has since being debunked by the particular MfB they accused. But for the one in the national dailies reported May 15, 2020 which seemed to be accusing all of us, all I can see there is mischief and lack of professionalism. You are all journalists, and I think professionalism demands that you hear from all affected parties before rushing to the press. If you read that publication, the writer quoted two purported microfinance customers. He also quoted an unnamed CBN source who referred to an earlier statement of the CBN governor as ‘moral situation’. The report even quoted some CEOs of Commercial Banks. But the writer never quoted any source from the microfinance subsector. What kind of shoddy and one-sided report is that? I will not be surprised if the reporter himself is a loan defaulter in one of the MfBs.
On the issue of loan extension or moratorium, it is the choice of the MfB to decide what to do. Don’t forget it’s a business relationship; the banks need the customers as much as the customers need the banks. It is in the interest of each party that the other party survives this crisis period. There will be life after this COVID-19. I have just told you what we have done in the interest of our bank and that of our customers. I am also aware a number of our peers are doing something similar or at least something close to that. We value our customers and we see their safety and survival as part of our success and survival.
I have also heard some people say that the CBN directed us to give loan extension to customers. That is not true. The governor made reference to extension or moratorium on the CBN loans. People should know that the CBN is not only a regulator but also a bank. That is why it is called Central Bank of Nigeria; because it is a bank. The CBN also gives loans to people and corporate organisations. Some of those loans they give directly to people while they pass others through other banks like commercial banks, development banks and microfinance banks. The ones that are passed through other banks are called on-lending. CBN in a way is a development bank. CBN’s money is public money and CBN is not after profit. It is those CBN loans that the governor was referring to. Any bank that has loans under the CBN on-lending schemes must automatically apply the moratorium and pass the effects to the end beneficiaries. At present, we don’t have any on-lending from the CBN. Currently, we have on-lending from BOI and DBN. For BOI, they have approved the moratorium and we have applied them to our customers accordingly. For DBN, we are working out that with them and we will apply to our customers accordingly. But it must be noted that on-lending from these sources constitute only a small portion of our loan portfolio.
For commercial banks, people must know we are not operating the same business model with commercial banks. Loan to customers is a very small portion of the commercial banks’ total businesses portfolio in Nigeria. They collect all the money from the public and give a little back as loans to customers. They collect so much from the public because that is where everybody goes. Even the people that collect loans from MfBs, when they have small deposit, they take it to the commercial bank. And they come back to complain that the microfinance banks’ loan is expensive. What they give as loan compared to the total money they take from public is very small. And how much of their loans go to the SMEs and low income people? Even the little the commercial banks give to that segment are given under stringent conditions. Those conditions are not easy for SMEs and low net worth individuals to meet. That is the reason why CBN had to start compelling them to give more loans recently. But some of them will rather pay penalties to the CBN than give loans to SMEs and the real sectors because they have many other ways of making money besides issuing loan. You don’t blame them also, because doing business is very risky in the Nigerian environment. And so, funding those businesses is very risky too. We as the microfinance banks are actually the ones taking real risks over our customers. That is all we do. More than 80% of a microfinance bank’s total asset consists of loans to customers. And the customers consist 100% of SMEs and low-income individuals. It means if all those customers refused to repay their loans for whatever reason, the MfB will go down.
What about the intervention funds by the CBN for the purpose of the COVID-19?
I am aware the CBN has announced a number of interventions and that is highly commendable. The economy will need a lot of stimulus packages to be able to bounce back after the pandemic. There is the N100 billion to the health and pharmaceutical sector and N1 trillion to the manufacturing and agriculture sectors. I think those ones are channeled through the Commercial banks. I am also not sure SMEs and low-income people will qualify for those. There is another N50billion for SMEs and households that are affected by the pandemic. That one is channeled through NIRSAL MFB. NIRSAL is another entity partly own by the government or CBN. I want to believe the CBN and the Federal Government will bring out more interventions. By then, it is likely they will pass something through other MfBs. Because we have the reach to the SMEs and low-income people. We also understand them very well. We speak their language. It’s only the MFBs you can walk into without any feeling of intimidation. You can see the CEO or any of the senior officials without serious protocol. So, it is in the interest of the SMEs and low-income earners that the microfinance banks continue to be in business.
What do you say about the fact that CBN is passing the N50billion intervention through only one MFB-NIRSAL MfB?
I am not holding brief for the CBN. Only CBN can tell why they decided to pass N50billion through one MFB out of about 1000 MfBs, all of them licensed by the same CBN. It is also noteworthy that NIRSAL MfB is about the youngest MFB in Nigeria. We have operated under CBN regulations for 11years now. The one they gave the money to is less than two years in operation. My own opinion is that CBN will soon come up with something that goes round all of us. I expect they will set conditions that any MfB that meets such conditions will be able to access the intervention fund. The problems we are facing are multifaceted. And only one entity or only one intervention cannot solve the problem. That one institution cannot be everywhere nor attend to everyone. I believe the CBN will certainly do something to ensure intervention through other MfBs. Not only for the survival of those MfBs but also to ensure the impacts of government efforts are felt everywhere and by many citizens. The CBN, in my opinion, knows better than to create another monopoly in an effort to alleviate poverty. There are reasons why CBN most of the times always passes its interventions through third party institutions. I think one of the reasons is that the CBN does not have the structure to reach all the citizens at the same time. From our various engagements with the CBN on the matter, I believe the CBN will come up with further interventions that will reach all of us. I also look forward to CBN relaxing the loan provisioning guidelines to accommodate some of the loans we have restructured because of the impact of COVID-19.
Do you think there was no need to create NIRSAL MfB in the first place?
No. That is not what I am saying. I believe the sky is big enough for all the birds in the world to fly. Poverty problem in our society is so big that one million entities cannot solve all the problems. This is not the first time the government will make this type of effort in addressing poverty problem. You remember the Peoples Bank of those days. My Aunty used to send me to the branch of People’s Bank in Ogbomoso to make deposit for her in anticipation of getting a loan from People’s Bank. I am not sure she ever got any such loan until People’s Bank became defunct. And so, as many as initiatives as possible are required to reduce poverty level and provide access for people are welcome. I remember when the idea of Development Bank of Nigeria-DBN first came around 2014 some of us were asking what such a bank will do that was not being done by the Bank of Industry- BOI already. Today, I am a customer of DBN and a customer of BOI at the same time. I believe the idea of NIRSAL MfB came out of the CBN passion to see the level of poverty reduced. But they should not see that new entity as a substitute to the more than 800 MfBs that have been on ground, all of them licensed and regulated by the same CBN. We will solve the problem better and faster by collaboration rather than by competition or a government-induced monopoly. When the CBN came out with the Microfinance Police Regime in 2005, investors responded not because they don’t have other things to do with their money. Many came into the microfinance space based on the faith in the credibility of the CBN in addition to their own individual profit motives.
You said what you are doing is not debt cancellation or interest waiver? Can you expatiate?
Even the commercial banks, none of them is doing debt cancellation or interest waiver. And there is no basis for anybody to expect general debt forgiveness. By the way, what we do is intermediation. We collect from those that have money at a cost and channel it to those that need money. Any money we deploy either belong to depositors, lenders or shareholders. Each of these people left their money with us at a cost and we are under strict obligation to return their money to them with interest anytime they need it. I cannot tell people that have deposits with me that I am unable to pay them back because there is Coronavirus. We also borrow from different sources to be able to on-lend to our customers. In fact, we have loans from commercial banks; none of them has cancelled the debt or asked us not to pay. So, if we don’t collect our debts, how do you expect us to meet our obligations to depositors, lenders and shareholders?
I also wonder why anyone will make issues out of the fact that a bank or any lender at all is asking for repayment of loans. Despite the pandemic, all of us still make phone calls and browse the internet. And we still pay for recharge cards. We buy data. We pay our electricity bills. Even if you go to the hospital, you still have to pay despite COVID-19. We did COVID-19 solidarity and awareness jingles on radio. The radio stations did not do those things for us for free. The people that composed the jingles for us to run didn’t do them for free. Even the government is still collecting taxes and levies. How then do you expect a lender not to ask for repayment? I think the only solution is adequate engagement between both parties. And if you are owing, you don’t have to wait for your lenders to engage you. It is your responsibility to engage your creditor if you have sincere challenge that did not let you meet your contractual obligations. Make the move to engage your creditor in dialogue. If you have any debt at all, either to a bank or a non-bank, the right thing is to engage your creditor in dialogue. Don’t forget your creditor is feeling the pains of the pandemic just like you are feeling it.
How will you assess government response to this COVID-19 at the global, national and state levels?
We must all agree that COVID-19 caught everyone unprepared. Even the so-called developed nations never prepared for anything close to the way COVID-19 has attacked the whole world. Hence, everything was initially about trial and error. You can see that even WHO didn’t have adequate information about this pandemic. And so, it is very difficult to assess the performance of different governments around the world, including Nigeria. For countries like Nigeria, the pandemic met a lot of other economic, social and security problems on ground. We must all remember that all those existing problems are still there. COVID-19 only overshadows all the other existing problems. To that extent we must acknowledge that our government, like the citizens, are treading on an unfamiliar path and so they deserve empathy and commendation. The outbreak also exposed the weaknesses already in our health system. It exposed our poor level of organisation. You see how difficult it was for the so-called palliatives to get to the targets. Lack of adequate records and documentation is a clear problem. NBS recently said about 83million Nigerians live in poverty. But who are those people by their physical identities? When it appears food distribution was very difficult, there was another attempt to pay money directly into people’s bank accounts. I was told Lagos state would be exempted from that process. Why, someone said because Lagos people are rich. But the number of extremely poor people in Lagos is higher than that of some states included in the list. Yes, there are rich and middle-class people in Lagos. But there are millions of poor people in Lagos also. I have a number of poor people as dependants, both in Lagos and outside Lagos. I don’t know any of them that have acknowledged the receipt of money or food from government. That is not to say the government is not distributing money or food. Rather it is a question of the process engaged in the distribution. I also feel very sad about the way our political leaders refer to citizens with degrading phrases like ‘poorest of the poor’ and ‘the vulnerable’. The lesson is that COVID-19 has revealed that we are all vulnerable, political leaders inclusive. Our political leaders are used to referring to citizens as ‘ordinary Nigerians’. As if they are now extraordinary Nigerians just because they hold political offices. They refer to us as average Nigerians, suggesting they are above average simply because they hold political offices. Calling Nigerian by names like ‘poorest of the poor’, ‘ordinary people’, ‘common man’, ‘the vulnerable’ and average person’ is very degrading and our leaders must think better of Nigerians if we must get better. It is psychological. Those are phrases that reinforce poverty in our society.
I also think there is too much noise about palliatives. Government should talk about economic packages, particularly now that the oil price is seriously against us. Palliatives are very important but we need packages that will help SMEs and corporate organisations to stay alive after COVID-19. It is the taxes this class of people and corporate organisations generate that will enable governments to continue to pay the palliatives. They are also the ones that create and sustain employment. Mass job loss will make our case worse and seriously increase the number of people in need of palliatives. In addition, government should do everything possible to address all the system weaknesses already exposed in our system by the COVID-19 outbreak. Aggressive efforts must be made to revive the health sector. Issues of reliable national census and national identity program should be given necessary attention. Diversification of the Nigerian economy is long overdue. The pandemic has affected the oil demand and has exposed the bad side of our over dependence on oil for foreign exchange earnings. I was concern that our government is talking less about research on the possibility of a cure or vaccine for the Coronavirus. We need to wake up from this idea of always expecting scientific solutions to come from Europe and America. I am happy about Mr. President’s reaction to the Madagascar herbal remedy to the effect that the product must go through our verification process. But we need to go beyond that to finding our own cure. We have scientists and we have herbs in Nigeria. It will have been better if we have a local solution and our own President is the one that is pushing for the regional and global acceptance of it. There is no serious conversation about research towards local solution. And if you say the government is doing something about that and we don’t know about it, then I will tell you that the fact that we don’t know about it suggests the level of importance that is attached to it. What we all have to know is that COVID-19 is a leveler. It has brought everybody to the same level. Europe and America are perplexed just like Africa is. It is our opportunity as Africa to shine and Nigeria is the giant of Africa. The western world will never want such solutions to come from Africa but at the same time they cannot stop us from developing our own solutions. Africa should also be thinking of how to replace China as the global manufacturing but post COVID-19. We have the space, we have the labour and we have natural resources. I think post COVID-19, the western world we face the choice between supporting Africa to grow or allowing China to annex Africa.
What do you advise microfinance banks and other SMEs should be doing currently to ensure their survival post COVID 19?
I believe I have said a number of things that are applicable to the survival of individuals, families and corporate entities both during and post COVID-19. But because you asked the question, the first thing is for everybody to take responsibility. We should all follow the precautionary protocols as put in place by the government. I believe the government also doesn’t have all the answers, but at least, they have better information than the individual citizens. People should adjust their lifestyles and spending habits. Cash is going to be king at the end of the day. Only put your resources on those things that are very essential. We are facing COVID-19 now, when this is over, hunger will be the main issue. Businesses should cut their expenses wherever possible. Businesses should also use this time to review their business models and do everything possible to transform, particularly to the adoption of technology. For us, what we are doing is to intensify efforts at our ongoing digital transformation process. Businesses should do everything possible to ensure good communication and relationship management with their customers and staff. This is particularly because you will need them after COVID-19. I see the rush to reduce staff, sack or right size. I want to suggest organisation should do their best to avoid job loss as this time. There some cases where job loss becomes unavoidable to save the organisation at large. But that should only be applied as a last resort. Engage your creditors in discussions and renegotiations where necessary. Review all your social relationships now and ensure you don’t unnecessarily expose yourself. Governments and corporate organisations are reviewing their budgets now, individuals and families are to do the same in their own ways. Citizens and businesses should make good use of different government stimulus package and palliatives.