Dr Kazeem Olanrewaju is the Managing Director/Chief Executive Officer of Baobab Microfinance Bank Ltd. In this interview with LEADERSHIP, Olanrewaju said the COVID-19 pandemic has helped them to introduce different platforms that are helping customers. He also speaks on how they will help pull the country out of recession.
Eleven years down the line, has the institution been profitable? What are your expectations for 2021?
Let me start from where we started from, eleven years and we are still counting, every year this bank has grown, from 2015 till date, there is no year we don’t record 35% increase across board in loans, in profit, everything has being going upward since the last five years and that we expect to continue, and that is why maybe five years ago, we have a bank that is not more than N2 Billion, but today, we are talking of a bank that is about N25 billion.
The loan book as at mid-December last year was about N15 billion, in terms of activity, it has being on the increase year in year out since 2015 and like I told you that the deposit as we speak is about N11 billion, we are having deposit coverage of about 80% that means for every loan that we give, every N100 loan that we give, somebody has deposited N80 in the bank, so whether it is loan, whether it is deposit or profit, we continue to grow and we hope to continue.
The public have being very acceptable, they have being able to accept the BAOBAB brand and the patronage is high, you have seen the number of people that have accessed our products and I can tell you without fear of contradiction that in terms of speed, efficiency we don’t have any match in this country, we process even SME loan within four days and even with the defaults is less than 4percent, it’s not reckless disbursement of loans, we have in place things that will enable our customers get answers from us, is either we tell you take the loan, this is our condition or no it’s not possible. There is nothing like you are waiting for one or two weeks. Here, we sanction people for not answering people on time.
Service delivery is one thing we pride ourselves, and as for what we plan to do in 2021, we have plans in place.
This plan covers the physical expansion we want to do, four new branches in 2021. In 2020, we were able to do two branches in Ibadan, our plan was to do four but due to COVID-19 we couldn’t, but in 2021, we will be expanding our network. I have talked about the agency banking, technology we are bringing, we have piloted our card we are bringing in, we will deploy it, so if you are taking small loan, you don’t need to come to the bank, you just collect your card and go to the ATM and get your money, and there will be no charges.
So convenience is going to be there. We also want to make our loans cheaper and make it available for people, especially the good customers, we will relax some of the conditions for the ability to borrow so they can expand their business.
Also, some of the things we want to do in 2021 is to increase our level of knowledge; this company is heavily reliant on human resources, that’s our greatest asset and building the peoples capability to better manage the business, so we have e-learning now, we have the physical class, we have the
e-library, you can borrow books and every staff must be trained. And then you know when it comes to disposition to our customers, there are some products that we will launch in 2021 just to help our customers.
During our customers forum we got some customers, what they desire the bank to do in order to make the bank their bank, and we try as much as possible to do them, we have done it in the past, but the emphasis is that we are going to be customer centric much more on what the customer is looking for. Currently, the country is in recession and we believe that we should be able to pull out of recession.
So these are some of the things and of course we are not taking away the fact that input in technology will be more because we want to give people the opportunity to bank in a convenient way, though it’s a micro-finance bank, we want to pride ourselves among the best, whatever you can get from a commercial bank, you should be able to get from us, that is the level we are taking the company to, so that is what we want to do to our customers, that micro-customers will be able to get the same treatment like the SME customers.
What are your experiences following the disruptions occasioned by COVID-19 pandemic?
Definitely, the impact of COVID-19 on business of the bank is real and is the same worldwide and for all the businesses in this country, we have impacts that are financial and we also have health impact, regulatory impact and business impact.
If you look at the issue of health, staff now have to wear their masks and observe all the protocols.
Apart from the fact that it’s not really easy, it is also expensive. Same thing goes to the customers where they have to wash their hands and also observe protocols.
In terms of physical impact, you will discover that the government had to come out with rules and regulations that made it almost impossible to do business at some point especially in the month of April when we had total lockdown, which means that within this period, you can’t do any banking activity except online because the whole system was shut down, so we could not take deposit, I mean people were paid but they couldn’t work.
In the same month of April, we recorded our lowest business activity in connection with all the restrictions concerning COVID-19.
Now, even the existing businesses were impacted.
The loan book, because we expected that customers will be able to make their repayments from their cash flow since the businesses was shutdown, they couldn’t do any repayment, so as a bank we had to undertake what we call loan restructuring, this was done in three ways, people who could pay all the arrears, we allowed them, and the second category are people who could pay the arrears and still stay within the tenure of the loan and then we had another category of people who requested for extension of the loan because there was no cash flow for them to be able to pay, so all these came as a cost to the bank, because as at the time we granted these loans, the understanding was that customers will pay back at a particular time, but COVID-19 made that impossible and we cannot collect the money in the people’s hands and of course we cannot charge them for holding it because it is not their fault.
So that resulted in a reduction in our profit expectation for those periods.
Truly, the impacts were real that one could see and feel.
So, what lessons have you learnt so far, and how are you trying to grapple with the new normal (technology)?
There are many lessons to learn.
First, is the impact of COVID-19 and EndSARS protests on the business, because we have never had something like this before, if you look at the system, it was not designed to
take care of issues like this.
So, the first lesson is that we now understand that this kind of disruption affects the customers’ businesses, and then as a bank we must have a way to address that, to help the customers, that was why we came up with the idea of restructuring.
This is the first time the bank is restructuring ever, even by regulation, the Central Bank is very strict in restructuring.
That is the first thing we have learnt.
The role of technology in doing business, before now, it was very easy to meet somebody, do your business and just do the things you normally do, but today we have
learnt that if you don’t have technology, you will be out of business in no time, and that is why we have created our Digital Transformation Department, which is meant to oversee all the digital channels we want to deploy as a bank.
So, I can tell you with all confidence that we have our cards, they are up and running, we have our USSD codes with which you can use to make transfers and we are also working on so many other things.
We are working on a software for agency banking; all these came, even though they were in our plans, we wouldn’t have rushed to do them, but now it is compelling that we conclude all of these, and it is coming as a result of COVID-19 where it became almost impossible to have human to human relations, and I think we have also learnt the lesson of testing some of the things that we have like little little policy to see whether in time of crisis, can this bank actually whither through the storm?
So part of the crisis management is the new normal, which we have learnt. Again, it was a time to activate a contingency plan to say, if something happens, which way should we respond?
So we tested some of those things during this period.
When it comes to human resources, we also, learnt that it is possible to work from almost anywhere and probably achieve the same result, you know the idea before was that you must come to work every morning, open your doors, attend to people but during COVID-19, that wasn’t the case but things still went very well especially in the month of April when there was total shutdown, we were still able to do
I will say these are part of the new things that we have learnt over this period.
Also, considering the new normal, is your bank planning to embrace agency banking?
For our agency banking, we have two or three models in mind, which we are going to run in parallel. One is to work with existing agents belonging to several organizations, they are already existing, they
have their offices, they have their shops, it is just to introduce our App to them and customers can access our services by going to them, that is one.
The second one is our own agency network, where we are going to provide them with all the equipment that they need in their shop to attend to our customers.
Now when you go there, what you see is typically the front end of our system.
So, they can check for their balance, collect money, and pay you using our own technology.
The third own is going to be strictly fully driven by technology, where we will have those agents at points where people can go there but we will do all your transaction on phone, for instance you can make a request like you need money and it will give you a code and you will go and meet the agent and collect your money.
The agent has no role other than either accept or give you money, and this, we will do especially
in areas where we cannot reach everybody, so it is going to happen in locations where we have branches today and locations where we don’t have branches. For places where we don’t have branches, our plan is to start by introducing the smaller units of loan, micro loans so that people can go to these agents and be able to access it easily.
That we are starting next year, actually we were supposed to take effect this year, but because of the effect of COVID-19, we decided to slow down on anything that has to do with expansion and increasing the business.
…But won’t the services that would be rendered by agency bankers not equate the bank with a quick loan platform?
It is not the same thing with the quick loan platforms, maybe a portion of it will look like lending, but that will be a small unit, that is when someone asks for a small loan of N5000 or N10,000.
We don’t need any evaluation for those amounts. For the micro loans, you don’t need any kind of evaluation, but if it’s getting to higher value, then definitely we will need to do evaluation. Even the agents, you know, the loans have to be in categories, we have our microloan, microloan plus, SMEs. Therefore, applying technology will play more role in the micro and even the mini-micro, maybe if you requesting for less than N20,000 but even with that, basic appraisal will be done, you will be able to check for basic things, like parameters that will be on the system, which the customer must be able to do and the machine will be able to understand if you qualify for the loan or not, but these are very small loans.
For instance, somebody can be able to walk into the shop and ask for N10,000 but the process of getting the N10,000 is not the same as getting N200,000, the person requesting for N2 million is not the same process, so as you increase the value, the level of assessment, level of appraisal and evaluation will also
change and will also increase.
Even with the agents, the agents know what they can treat per time and what they cannot.
So, the agency will run like a typical branch you have today. Can you get a loan of N12 million from the Branch Manager, it’s not possible but can you get N15,000 or N20,000, Yes. If you apply, the Bank Manager can process almost immediately, but can he do N1million like that, No.
Therefore, it is important to note that the level of the value goes with the appraisal.
Of course this will be properly documented and the agents themselves know the limits they can go, don’t forget these monies are going to be released by somebody in the system, and before the loan is
disbursed, the customer must have met all the criteria, which will be clearly stated, you go there and you know what you are to do and once you do those things, you will be able to get your loan, but for the
SMEs, it’s just impossible to have an SME loan outside our system whether with technology or agent.
The SME will have to go through the normal process of appraisal and evaluation before the customer can access the loan.
So Yes, you can get some loans but it depends on the loan, this is what we call mini-microloans.
Do you have businesses who until now have not been able to pay back their loans due to COVID-19 and violence that trailed the #EndSARS protests?
Definitely, you have a lot of businesses that were impacted, that’s why I explained the fact that loans were restructured, about 90% of our loan book have been restructured in June, but presently, it is less than 30%. So, as of early December, we had about 18% of our loans being restructured, meaning that customers who don’t have the money will be able to make their repayment. Also, some States did not open up when others did, places like Kaduna.
In Ondo, we restructured and the people couldn’t pay back as at when they should be paying because
the economy was shut down, but the good news is that everybody is up and running and they are paying back, and of course the restructuring is done to take care of customers who are having defaults with their cash flows and I think it has worked fairly well, like I said we restructured about 90% but today is less than 18%, so the expectation is that before the end of the first quarter of next year, all the restructured loans should have been done with.
Going back to the North where we have the operations of bandits, how has the bank been able to support businesses?
I want to say without any contradiction that we are the largest microfinance bank in the North up till today.
We started in Kaduna and there is no doubt about that, and today in Kaduna and Abuja, we have
nine branches and we are opening the 10th one in Jos, we are searching for a plot.
So, we have our eye on ten branches in the North, so in the whole, we have about 23 branches, ten of them are in the North and the remaining 13 are in the South.
Of course, this is not abnormal, when you look at the insurance and financial institutions in the country, they are much more concentrated in the South-West and so having 13 branches in the South and ten in the North looks like the normal trend and maybe more better than most institutions and if you want to talk in terms of the support that we have granted to the North, toady about 45% of our loans are granted in the North so far this year, we have granted over N20 billion loan, so if you do 45% of it in the North, at least you have over N9billion that has been disbursed in the North, and in terms of the numbers of customers in the North, on the average we have 1,300 to N1,500 every month, so in a year, you probably be looking at 18,000 people that benefited from our loan.
Ordinarily our plan was to distribute about N15 billion this year in the North, but because of COVID-19, we are sure to have done N10 billion and by the end of the year instead of the N15 billion we have planned earlier on, so our presence in Kaduna is very strong and we are still expanding. Our idea is to finish with Jos, then move to Kano and other areas. You know if you look at the financial industry landscape in Nigeria, just look at Lagos, most banks have more branches in Lagos, the reason is not farfetched, take a look at the per capita income in Lagos, it is very big, not only that, you have access to resources, technology and capital to do a whole lot of things in and within Lagos. So, this is part of what is responsible, but this year about 55% of the internally generated revenue of the country came from Lagos state, so that tells you that Lagos is an economy that is self-sustaining and that’s why.
But then, we have our eyes on the North, like in Kano.
So, the North expansion will continue but we need to overcome these challenges in order to be able to grow rapidly like it is in the South-West.