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 in 2009, a subsidiary of Skye Bank Plc. Ade as the business incubation expert, life coach and author is fondly called by friends, in this interview with ARTHUR AGHOGHO ERIYE speaks on the prospects and challenges of microfinance banks
Can you tell us about yourself, who is Adegoke Adegbami?
My name is Adegoke Akinola Elijah Adegbami. I am an alumnus of the School of African Microfinance – Mombasa, Kenya from where I specialized in Strategic Planning using Microfin Tool and Financial Analysis for Microfinance Institutions (Seep Tool). I am a banker with in-depth knowledge and experience in Financial Management, Performance Management, Audit Practices, Financial Reporting and Management Accounting and different areas of Management Practices. Before the formal introduction of Microfinance Banking in Nigeria, I worked as a Management Consultant to different organizations including banks. At the introduction of Microfinance Policy by the Central Bank of Nigeria in 2005, I worked as a Consultant in the conversion of a number of Community Banks to Microfinance Banks especially in the Eastern parts of the Country. Thereafter, I joined Amaifeke Microfinance Bank Limited as the Head of Internal Control and Audit Department from where I moved to Mainstreet Bank Microfinance Bank Limited in 2009 as the pioneer Head of Internal Control and Audit. To God be the glory, I rose to the level of an Assistant General Manager – AGM and Chief Finance Officer of the Bank. From there, I became the Managing Director/CEO. I have also authored many books on different aspects of microfinance and financial empowerment. I am a facilitator on MFI Strategic Planning, Financial Analysis, Risk Management and Transformation Management. I am also a Fellow of the Institute of Chartered Accountants of Nigeria – ICAN, a Certified Microfinance Banker (MCIB) of the Chartered Institute of Bankers of Nigeria – CIBN and a Full Member of the Institute of Strategic Management of Nigeria. I am a Fellow of the Institute of Credit Administration, a member of the Nigeria Institute of Management Consultants and a member of the International Professional Managers Association, UK with Certification of Professional Diploma in Organizational Transformation. Am also an Associate of the Chartered Institute of Taxation of Nigeria-CITN? I have also attended many local and international microfinance trainings; I have further undertaken study tours of successful microfinance institutions in West and East Africa. Among these are Equity Bank of Kenya, Jamibora Trust, Kenya, Faulu Microfinance Bank, Nairobi, Kenya and Ghana Microfinance Institute. In 2016, I received African Prize for Leadership Excellence. I attended the Federal Polytechnic, Ede where I got my HND – Upper Credit in Accountancy and an MBA in Financial Management from Ladoke Akintola University of Technology, Ogbmosho.
Can you tell us the vision behind the establishment of Mainstreet Microfinance Bank? Mainstreet Microfinance Bank is a subsidiary of Skye Bank which was established in 2009 precisely, in line with the Microfinance Policy Guidelines of the Central Bank of Nigeria-CBN. The reason why Skye Bank (then Afribank) went into Microfinance Banking was because we have a lot of people at the bottom of the economic pyramid that could not be attended to within the commercial bank or what we call money deposit bank model. Mainstreet Microfinance Bank was registered in 2008 and we started operations in 2009. Besides, we have very loyal customers, which include individuals artisans, traders, small households and trade groups. There are corporate ones, those involved in the organized unions and associations and SMEs. We have the small time savers as well. All these customers have patronized us over a period of time, so you can say that Mainstreet Microfinance Bank has proved its worth in the Nigeria market. People can always align with anything done by Mainstreet Microfinance Bank; everyone wants to associate with success. So the Parent Bank thought it wise to set up a microfinance bank because we had a lot of loyal customers who beyond putting their savings account for safety in Skye Bank cannot do any other transaction, they cannot access loans because they don’t have the conventional collateral they cannot meet some documentation requirements of commercial bank. We thought it wise to say look we have been here for a long while, now the Central Bank came with a microfinance policy to address the financial needs of the lower end of the market, especially the small and micro customers. We then took advantage and created a platform where we could serve them. We want to empower as many people as possible because, our mission is to serve those that are hitherto unbanked or under-banked. We attend to the poor in the society who are into productive small businesses, those that want to pay school fees and then repay us from their small individual or family cashflow, those that want to do small agricultural businesses and those that want to do small savings. The primary aim of microfinance bank is to ensure that the poor and low income earners have access to financial services, for their transfers, access to loans, micro insurance, micro health and every other financial service. In summary, we attend to those people that are normally excluded from the formal financial system.
What is you view about microfinancing in Nigeria, do you think it is really working? I think we need to basically go back to the definition of microfinance. Microfinance means providing financial services to the small and low income earners. But when you look at the Microfinance, there are some that are in the SME group, there are some that are very micro, i.e. those trading in petty markets and so on; so it depends on what you want to focus. For a microfinance bank you can’t attend to all of them. For instance, if you want to tackle the issue of poverty, are you going to get everybody on the street to come and do business with you? Some of them will come but they cannot really save their money, some of them are actually involved with one small business or the other. These are the ones we call the active ones because they are actively involved with something so these are the ones we target; the ones we believe if it’s effectively done they will bring their money to save in the bank and they will also be requiring small loans and also employ someone else. They also get their businesses better structured, better planned and maybe need to expand when it gets better with time into a limited liability company.
What do you have to say as regards the closure by CBN of a lot of microfinance banks during the economic recession of 2009, 2010? The 2008 global economic meltdown drew a lot of issues and challenges. There was the challenge of people losing their jobs and then looking for something to do. Microfinance provided an opportunity where they could get some money, those people that lost their jobs for example could start some small scale businesses. Each of them can also provide jobs for two or three other people. There were also people that lost their jobs in the commercial banks and saw microfinance as the natural alternative. Shortly before the meltdown, there was the banking consolidation in Nigeria. Consolidation reduced the number of commercial banks in Nigeria from 82 to about 25. Many people in the money deposit banking space lost their jobs in 2006 and 2007 due to reorganization, rightsizing and downsizing following the banking consolidation. The next thing was for those people to get jobs in the emerging microfinance space. In a typical Nigerian way, many of these people believed that microfinance means the smaller version of commercial bank. They believed the commercial banking knowledge they had was enough to run microfinance business. They were wrong. At the regulators level, many of the examiners were using their commercial bank orientation to examine microfinance banks. The microfinance market operates on a different ideology and methodology. It is very dangerous to use the strict commercial bank knowledge and methodology to run a microfinance bank. The market is different. The people we are dealing with; their lifestyle and their needs are different from that of an average commercial bank customer. For instance there was this belief that you can use the microfinance bank license to mobilize cheap deposit to either fund the micro credit program or other businesses. The truth is that Microfinance Bank cannot even become self-funding in the first two to three years. You are dealing with a net deficit section of the market and so you must get money to bring into that section of the market. Therefore, the knowledge gap was largely responsible for the failure of a number of Microfinance Banks. People from commercial bank background also had this problem of wanting to keep their expensive lifestyle. So they put on Microfinance Bank the kind of expenses that are unsustainable. Things have changed today. The operators and regulators know better now. Even our customers now know better. They know that microfinance loan is not a share of national cake. CBN has organized and sponsored certification training for operators. For you to be in a management role a microfinance bank in Nigeria now, you must be certified. There are also training programs for the non executive directors of Microfinance Banks. We must also remember that a number of Microfinance Banks have done well over time, particularly those that took the issue of capacity building very seriously. Mainstreet Bank Microfinance is one of those that have done well. Here, we don’t joke with the issues of training and planning.
How do you manage the issue of bad loans in your bank? There is an adage that says ‘’There are no bad followers but bad leaders.’’ So you need to do your assignment before you pass your money to your customers because once the money leaves your hands and it’s in their (customers) hands they have a stronger point. There is also an adage that says ‘The mouth that people use in borrowing is different from the one they use in paying’. That means you need to do your assignment before your money leaves your custody. So we talk about all issues of policies that relates to risk and the type of policy we have are policies that tell us that this is how to begin a loan and this is where to end. There are businesses we can do; there are also businesses we cannot do. The kinds of things we observe are cash flow of the person, the integrity of the person and sustainability. Once the customer has met all the conditions we then disburse the money. Some bad loans are also results of connivance between fraudulent staff and some customers. So in actual fact, we don’t let the customer go and sleep, we monitor them; that is what also determines the location of our branches. So the monitoring mechanism carried out by our Loan Recovery Officers is very alright because it’s not just about loans, you do your assignment before disbursement, you monitor and make sure the money comes back as at when due because the main asset of the Microfinance Bank are the risk assets and loans. If the policy of the loan is not well managed and you are unable to recover, it will be eroding your capital and you will be losing money and gradually you will be out of the market. The procedure we have put in place has helped us thus far.
What is the customer base of your Bank as at today?
We have over 80,000. Some of them are on loans while some merely save their money with us.
Will you really say your bank is playing at the grassroots level? Our customers are broadly divided into two categories. We have those in the rural areas and those in the semi-urban areas. In Lagos, for example, the places where we operate are what you can call semi-urban. If you look at the outskirts of the Island, you look at the mainland and also the rural areas these are the places that are densely populated so we are targeting them. Even most of our customers who are doing business in the major markets on the Island are people who reside in the outskirt of Lagos, like many parts of Ikorodu, Abule Egba, Ikotun, Ejigbo and so on.
Tell us about the present challenges faced by microfinance banks in the country? There is the issue of capacity building which is being addressed by the day. There is the issue of funding. Microfinance needs stable funding both from private commercial and development sources. Poor credit culture in our society is also a major problem. I also think that Microfinance in Nigeria is currently being strictly regulated compared with what obtains in many East African, South African and Asian countries. We know that the regulators, objective is in response to the nature of our own society. But we should get to a point were some small scale microfinance can operate just like the modern forms of our typical Alajo or Esusu system. Those people will not need twenty million naira to start their businesses, particularly in our remote villages. Their activities would be guided by other business related parts of our laws, pending when they will grow to the level of strict regulation. At that point, they will be compelled to list for regulation. Also, lack of public infrastructure makes the business of microfinance to be very expensive. Microfinance is naturally expensive because of it small loan sizes and the labour intensive nature. But Nigerian environment is more challenging because of the absence of public utilities.
Is Mainstreet Microfinance Bank involved in any corporate social responsibility? We can say we are doing corporate social responsibility. Microfinance itself has a social aim, so that is why Mainstreet Bank MFB is doing Microfinance. But basically what we do by way of what you call corporate social responsibility are things like providing capacity building opportunities for customers, especially the group loans customers. Before we give them, we educate the people, we teach them basic skills like book keeping. Lets assume that you did a business of N50,000 and you got N55,000. N5,000 is your profit. Profit means you have to meet up all other expenses like transportation and the likes. But we have also been involved with some social activities too in form of training our staff and also organize some get together party for members of staff to interact and have fun and also network. We give them training that are not necessarily needed for the job but for their personal development. Our leadership disposition fuel our passion for success and the setting up of people and also training them on wealth creation, entrepreneurship mentoring and on capacity building whilst, creating awareness for young entrepreneurs to start their own business. We do some health awareness campaign in our organization. We have also organized retirement training for some of our consumer loan customers.
We understand that some banks use thugs and other illegal means to collect debts from customers, how do you recover yours? It depends on what you mean by unlawful or illegal means. If you owe then you must be prepared to pay. At Mainstreet Microfinance Bank, we ensure that customers sign undertaken saying if you don’t pay us we will take your items and sell, but that is the very last option because even if people don’t know us they know our Parent Bank. So it is easier to say a subsidiary of this bank did this to us. We don’t do things that are illegal or involve violence. We have our name to protect. By training we know that we don’t need to go that far. The default in effect may be an indication that we did not do the selection properly from the beginning. If you do the right thing, it’s not as bad as people think. Let me tell you, if you do micro lending the way you are supposed to do it; out of about every 100 people, I can categorically tell you that 80 people will pay you without giving you any single problem, 80 out of 100. They don’t have that kind of thing in the commercial banks. Just make sure you don’t over expose them, you don’t give them more than they need and you treat them very well. Also be sure you don’t have your staff trying to connive with them, because sometime you have staff who can even go to influence the customer to default because they want to get something out of it. If you take all those things away, every 100 naira you lend to customers, 80 naira will be paid without any pressure. Of course there is a problem that people don’t take note of, often times; a Microfinance Bank wants to compete with a commercial bank. You are not dealing with the same set of people, if we are competing with them, you will go for the wrong customers. There are people that come here and we say no we are not dealing with you, you are not our customer. Because we are dealing with people who can see us as their role model, people we can talk to and guide them on how to do their business not people who think they know it all. If you select your customers very well, it is not as bad as people paint it.
What is your five years projection for Mainstreet Microfinance Bank? Five years from now, Mainstreet Microfinance Bank is going to have a balance sheet of N20 billion, and like I said, our customer base is going to be a minimum of 1million people, our stretch within the next five years would have covered at least one third of the Nigerian States. Of course we are very selective of the places we go because it’s not every place that is viable but we have targeted places that we want to go and I can also say that within that five years, we also want to have other arms, the Insurance and Health Services. We have a training school today which we believe would have been upgraded within the next five years to be able to service other people beyond our own bank alone. Our staff complement will be around 2000 staff at the end of 5yaers. We also want to go into payment system and collaborate with reputable Fintech companies. We want to improve on our social corporate responsibilities. There are going to be people by virtue of having been with us for a specific number of years; we should be able to give them what is called health insurance for free. We really need to have another outfit that can work with other medical outfit across the nation. We are also going to have the charity arm that is going to be around the end of the fifth year, we will have a charity arm where we can provide scholarship for some indigent people and our target is that they are going to be children of our customers. We give them scholarships from primary to the higher institution, so those are the things we have in mind and I also want to say that as a person, I believe that maybe it’s a gift or whatever but when people hang around me, they must grow so within the next five years, all the people that are here today with us, we want to see that they have grown five times more, financially, morally and their exposure and every other thing.
We are not only involved in business, but we will groom the people, we will train them on business, we will also give them other trainings that will be useful for them in their private lives, because we want a situation whereby people that have worked with us for a number of years should be able to say; okay at this particular age, I want to retire and I want to go into this business. Of course we are not putting you on a life pension, but we would be able to equip you while you are with us and we will encourage and open your eyes to how you can plan your life and when you are out you will be happy for it.
Is Mainstreet Microfinance Bank involved in any corporate social responsibility?
We can say we are doing corporate social responsibility. Microfinance itself has a social aim, so that is why Mainstreet is doing Microfinance. But basically what we do by way of what you call corporate social responsibility are things like providing capacity building opportunities for customers, especially the group loans customers. Before we give them, we educate the people, we teach them basic skills like book keeping, okay this is what is profit to you, so assume that you did a business of N50,000 and you got N55,000. N5,000 is your profit. Profit means you have to meet up all other expenses like transportation and the likes. But we have also been involved with some social activities too in form of training our staff and also organise some get together party for members of staff to interact and have fun and also network. We give them training that are not necessarily needed for the job but for their personal development. Our leadership disposition fuel our passion for success and the setting up of people and also training them on wealth creation, entrepreneurship mentoring and on capacity building whilst, creating awareness for young entrepreneurs to start their own business. We do some health awareness campaign in our organisation. We have also organised retirement training for some of our consumer loan customers.
Do you also think the policies and programs of this current administration encourage business?
Well, I think this government got many things wrong at the beginning when it comes to the economy. We also have so much of the blame game. Government must have deliberate policies to encourage business and circulation of money. There is the need to control resources and block leakages, but you must know that money is not useful until it is spent and allowed to circulate within the economy. The rate, the speed or the velocity at which it circulates is also very important. There is no benefit going to lock all the money up in the Central Bank Vault.
I must also add that we are beginning to see some changes. International investors are now picking up their interests in the Nigerian market again. We encourage the government to do more because we have lost so much ground.