How do you think financial inclusion has evolved in Nigeria over the past decade?
The Financial Inclusion Programme which commenced in October 2012 by the federal government of Nigeria through the Central Bank of Nigeria (CBN) was aimed at achieving adult financial inclusion of 80 per cent by 2020 which stood at 46.3 per cent as of 2012. Financial Inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs, transactions, payments, savings, credit, and insurance, delivered responsibly and sustainably.
Though there have been significant improvements, the 2023 reports show that Nigeria had achieved 74 percent in 2023, up from 68 per cent in 2020. The target of meeting 80% by 2020 has not been achieved despite several policy reviews by regulators, the challenges that plague the success of this noble programme seem insurmountable shortly, some of these challenges range from unwholesome practices by some operators in the financial industry to most especially the non-regulated operators; financial literacy remains a key challenge which disproportionately affects women, smallholder farmers, and other in the rural areas; lack of access networks continues to be a key barrier despite significant growth in agent networks over the past decade.
Despite the challenges, we have witnessed increasing entrants into the Financial Inclusion space expanding the dragnet and bringing Inclusion to the underserved, the rise of ZITRA, Moniepoint, Opay, Otech, and Paddymi to mention but a few have contributed immensely towards the actualisation of the Financial Inclusion of the government.
Can you discuss the role of Microfinance Banks in Nigeria’s economic development?
Nigeria has a significant number of small businesses operating in various sectors of the economy, these businesses are often faced with the challenge of accessing finance to grow and compete with larger firms, these small businesses have always been denied access to financing by the big banks thereby stalling their growth. Micro-finance banks emerged as a viable option for small businesses to access finance and grow their operations.
In 1998, the UN General Assembly declared 2005 the International Year of Microcredit in recognition of microcredit’s contribution to poverty reduction, towards achieving the Millennium Development Goals, in line with this reasoning therefore, the Central Bank of Nigeria (CBN) introduced Nigeria’s first Microfinance Policy Framework which was introduced in December 2005 which led to the commencement of licensing of Microfinance Banks in Nigeria.
The first sets of licences were extended to the then then-community banks which were converted into Microfinance Banks, Microfinance Banks aim to enhance the capacity of the financially underserved through the provision of microfinance services to enable them to engage in economic activities and be more self-reliant; increase employment opportunities, enhance household income, and create wealth.
The impact of Microfinance Banks in Nigeria cannot be overemphasised as its impact is visible in our economy today ranging from Job creation, provision of credit, provision of financial services, capacity development, Agricultural Development, poverty reduction, Education, and lots more
The Microfinance Banks in Nigeria can drive government policy of poverty reduction and job creation without stress, all that is required is good and favourable regulatory policies. Despite the unfriendly business environment and policies, the Microfinance Banks are still doing great in their mandate of being the only hope for the common market men and women.
Based on your experience, what are the biggest challenges microfinance banks face in Nigeria today?
The challenges Microfinance Banks are facing in Nigeria are majorly categorised under three broad categories which are: Lack of Corporate Governance; unfavourable regulations; and High Cost of doing business.
Some operators in the industry have not come to terms with the importance of Corporate Governance and the impact it has on the performance of the institution they own or operate, as simple as it sounds, the success and failure of every Microfinance Bank are tied to either proper Corporate Governance or lack of proper Corporate Governance. A study of all failed Microfinance Banks that got their licences revoked by the Central Bank of Nigeria showed weak Corporate Governance. There are instances where some Microfinance Banks don’t have a functional Board of Directors, there are some that have Boards but the Board has no say as one-man seats somewhere to decide what happens, the directors appointed are just for regulatory compliance, in instances such as this, the management of the bank has no direction and the bank is headed towards losses and possible closure.
The government on the other hand has made it difficult for operators in the sector, the sector is currently battling with regulations, and the cost of compliance is getting higher by the day thereby increasing operational costs. Yearly we hear and read on pages of papers of numerous Government funds on poverty reduction being channelled through other sources to beneficiaries which has not yielded the much-desired results.
The government is very aware of the role Microfinance plays in the economy, should these funds be channelled through the Microfinance Banks, the management and disbursement will be handled properly and the desired result will be seen in the economy. For the avoidance of doubt, Microfinance Banks are the only veritable tool the government can use to boost the microeconomy.
Year on year the cost of doing business gets higher due to inflation and multiple taxation. Inflation has caused a surge in the cost of leaving thereby increasing personnel costs for a Microfinance Bank to attract and retain its employees regardless of its profitability.
Microfinance Banks are cash cows for local government and state government levies, as a Microfinance Bank you are faced daily with various levies ranging from; radio tax, television tax, generator emission tax, tenement rate, sewage tax, business premises tax, security levy, emblem levy, signage Levy etc apart from other regulatory fees and levies.
The current economic situation in the country has a serious negative impact on the sector as there is an increase in non-performing loans, and customers’ inability to repay their loans due to bad business has affected the microfinance banks badly.
What competitive strategies would you recommend for Nigerian banks to remain competitive in the African market?
The Nigerian Banks are doing great within the African Market but much is still required, the current Central Bank of Nigeria’s new Capital Regime for the Banks if achieved will better place our Banks.
My advice to some banks will be to focus on simplifying and standardising products, processes, and technology to increase productivity and efficiency, reducing operating costs will allow more investment in innovative technologies that change how services are rendered.
How has technology impacted banking operations in Nigeria?
Banking has evolved and is still evolving and we are yet to catch up with the trend as compared to what is invoked with other developing countries.
Technology has taken over the banking sector though some banks never saw it coming and were caught unaware and are now grasping to cope with the new normal.
Technology has impacted the Banking sector positively ranging from reduction in cost of operations to increased earnings and larger coverage and simplifying banking services.
Now people no longer choose a bank because they know the owners but because of service efficiency, banking is now brought to the people and not people going to the bank.
Technology also added an income stream to the banks which is the Sale of Convenience.
How would you describe the regulatory environment for banks in Nigeria?
The regulatory environment is fair, the regulators are yet to catch up with the speed of the evolution in the banking sector and this has caused the slow pace in banks rolling out new products and services because all products and services must be regulatory compliant and were there are no regulations covering areas were the bank has discovered an opportunity the bank has to wait on the regulator and this is the window the Fintechs and unregulated sectors have been exploiting which they call regulatory bypass.
What do you consider your most significant achievement in your career so far?
Looking at my journey so far in the sector and the different positions held as an operator and also my journey as a consultant handling complex situations, has given me a broader experience, I now look at issues from both the operator’s and Regulators’ perspectives which give me an edge in every project we handle. The experience and knowledge gathered are the greatest achievements.
Can you discuss a time when you had to implement a significant change in a bank’s operations? What was the outcome?
My experience at a Microfinance Bank in 2020 was a rewarding one. I was faced with a complex system that needed to be unbundled to allow the bank to survive and become profitable after Continuous losses, Poor Corporate Governance, Poorly Motivated Employees and Out of fashion products and services. The bank closed 2019 with a loss position of over N40 million.
The process of getting these issues sorted out was faced with stiff resistance which is normal with change, the beneficiaries of a failed system will never want a change but we were committed to the cause and even before the process was completed the bank was sound.
2020 was a year marred with COVID-19 and Endsars protests that disrupted businesses but in the face of all of that, the bank realised a total deposit increase of N1.1 billion and disbursed loans on new products to the tune of over N800 million.
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