For the benefit of the less informed, in what way is microfinance bank important to the economy of Nigeria?
The role of microfinance bank in economic development cannot be underestimated because what is important in any economic development is, one, how to improve economic activities. And the economic activity is down at the grassroots level. There was a study that was conducted in this country which revealed that this country has over 19 million micro small and medium enterprises that need about N9trillion for us to jumpstart the economy. And we are talking about 968 microfinance banks, having only about six million customers. We are not even there. The study also shows that those people who are under-banked are about 40-something percent, we are coming from about 80-something percent. So, as we speak, there is a gap. There is a need in this economy and the only structure that can fill in that gap is microfinance. Number one, microfinance bank’s role is to improve access to finance. Once you can sort out the major problem of Nigeria which is access to finance and access to market, and you can sort out the problem of access to finance at the grassroots level, you are sure you are going to have a robust economy, your GDP is going to improve. And that is what microfinance is even there for. And the multiple of N50, 000 tells you how many people you can empower in this country. Again, we are having a challenge in the access to market. When farmers produce foods they have nowhere to store them, when fishermen get their fish they have nowhere to store them, so they begin to sell under duress because they have nowhere to store their harvests. So the moment the Federal Government can use the structure of microfinance banks to take care of these two major problems, the economy will be back on its feet and we will be out of this recession that we are in.
Majority of people still do not embrace the microfinance concept due to the high charges. What are the plans to sell the microfinance idea to more people?
People are talking about high rates; at the beginning, the microfinance subsector is celebrating 10 years of its existence now; they have been reformed, so many things have changed, and the Federal Government intervention has come in to dilute the interest rates that we have currently. Initially, people used to charge as high as 10 percent. Now, what is important to Nigerian populace, especially the micro small and medium; is it the interest rate or the access to finance to do their business? However, microfinance banks came into the space; what they were charging initially was higher but because there had been interventions; donor funds, and grants, so more people are coming in, and it is as well further reducing. It is a gradual process. We are only celebrating 10 years. Before we get to celebrating 50 years, we are going to get it right.
What are the strategies being employed in that regard?
When you work on capacity building, when you work on the infrastructure of this economy, when you work on the financial infrastructure where people would not collect money and run away, you will see the interest rate coming down on its own. What we have now is not too high; it’s still on the average, and then the CBN has also intervened with funds, N220billion of which you must lend more than nine percent per annum. Even any commercial bank in the country today is lending at that rate. Then government needs to do a lot, especially the CBN, in terms of image laundering. And that is why we are extending a hand of fellowship to the press so that you can see what we are doing in that subsector. The moment we begin to have a good projection in that sector, we are going to have a more robust microfinance in this country.
The complaint from the small and medium scale business owners is that some microfinance banks charge higher interest rates that they find it difficult to pay back. Are there rules to check defaulting members of your association?
There is the saying that, if education is expensive try ignorance. The man that is collecting esusu (daily contribution) on the road is giving out money at 10-15 percent flat and people are collecting it, even when we hear some of them will collect people’s money and disappear. Yet, the average rate in microfinance bank is five percent. What is the prime lending rate in commercial bank that has 25 to 100 billion of share capital; 24 percent, which is 2 percent aside other charges. One thing that we need to get is that, how do you determine the interest rate that you charge on loan? It’s a function of so many things. The cost of funds is a major determinant of what you will charge. If I access money for me and you, you give me money and I’m giving you 15 percent, I must make a spread in order to take care of my infrastructure. So, that is what informs the interest rate. Interest rate is dependent on so many factors and except you work on those factors. Factors like government’s involvement in terms of infrastructure. Do you have roads? Who is willing to go to rural areas? Do you have light? So, government needs to do its own bits and operators too need to do their own bits and then we all smile at the end of the day.
What prepared you for this profession?
In terms of professional qualifications, I have expertise in several disciplines. I hold an LLM from the University of Huddersfield, United Kingdom, an M.Sc in Management Science from the Winneba University of Education, Ghana and an MBA from the Delta state University, Abraka. An Associate of the Chartered Institute of Bankers, Associate Member of the Nigerian Institute of Management, Associate of the Chartered Institute of Taxation of Nigeria, Associate of the Chartered Institute of Arbitrators, UK, and a Fellow of the Certified Public Administrators of England & Wales. For post qualification experience, I have so far worked for in the financial sector for over 20 years.
How would you describe the present state of Nigeria’s economy?
Nigeria’s economy is a very good one; it is an economy that is blessed. The only major problem the economy is the operators, which is the leadership. Once we get the right leadership in place, every other thing will fall in line, because we have every good policy you can talk of in this world. We need to also support a government that is sincere. The problem we are having in this country today is man-made. Once we have the leadership that can take care of man-made problems then we are on the path to greatness. Nigeria’s economy is an economy that will beat any economy in this world but corruption has eaten deep into our fabric. The major product that aids great economies in the world today is oil, and Nigeria is rated the sixth among oil producing countries. In gas which has not been tapped into, Nigeria is rated the third largest in the world. Even in my own subsector, microfinance bank, Nigeria is number one in the world. Then why are we not getting it right? That tells you that there is nothing wrong with the Nigerian economy. Once we have good leadership, we are going to get good economy. And for us to tap into other sectors to boost our economy we need to be sincere with ourselves, we need to work on corruption that has eaten deep into us. We need to make scapegoats of a few people; we need to get one or two corrupt persons behind bars. Then it tells us that we indeed are ready for greatness again.