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Nigerians’ Attitude To Microfinance Banks Killing The Sector –Bekey

microfinance bank
Posted: Apr 4, 2016 at 2:30 am   /   by   /   comments (0)

 Why  Microfinance Banks Do Not Give Long-term Loans

The Managing Director of Future Growth Microfinance Bank Limited, Frances
Bekey ,has has vast experience working in  the financial sector for over
25 years. In this interview with Chibuzor Emejor, she speaks on
challenges faced by microfinance banks in Nigeria, the misconceptions of
their operations and other issues.

When did your microfinance bank start operations? How has it been since you
started operations?

My name is Frances Bekey. I am the Managing Director of Future Growth
Microfinance Bank Limited. It is located in Utako, Abuja. We started
operations in 2008. So far, we have come a long way, it was bumpy at the
inception. We are where we are now, because we all know how the Nigerian
economy is. Everybody is complaining about the economy. And we are
operating in the same economy. All together, it has not been bad altogether.

What major challenges have you confronted right at the inception of this

The major challenges were; number one, staff. Like I said it was a new
thing, and so we needed what we thought we had in mind, it was not what
we met. So we needed to train staff and of course, they kept coming and
going. The staff turn-over was high but then we had done good training,
capacity building put together by CBN,NDIC, CIBN. Having certified us, we
now understand microfinance banks much more than when we started.

Analysts have criticised operations of microfinance banks. They are of the
opinion that microfinance banks are run like commercial banks in Nigeria,
in the process, the people who the banks are meant for are excluded. What
is your take on this?

Well, my take is that we don’t run like commercial banks. We are only
established to assist the active poor. Now, when we talk about poverty, we are
lucky that CBN defined those that are our target market. They are the
active poor. This ultimately means that somebody is already doing something
to earn a living. In the real sense of it, they are not poor people. It is
people who do not have access to funds to drive their businesses. That is
why the CBN called them active poor. It is the government business to take
care of them. In other countries, those people are the problems of
government. It is the government that will give some kind of grants. It is
the responsibility of the government to take them out of that level they
can come to look for where to put their money. The level that they can put
their money is where we come in. We are expected to nurture and train them
so that they will reach a level where they can now access funds from the
commercial banks. Why people think that we are running like commercial
banks is that for some time now, it is only microfinance banks that people
go to and borrow money. The commercial banks were not actually lending
money as it were. So if Lagbaja needs money, he goes to microfinance banks
and gets loans, and it does not mean that we are commercial banks. People will
think that we are commercial banks. So we run our banks in line with the
policy that established us. There are policy documents that guide our
operations in the way we run microfinance banks. Every microfinance bank
is a profit-making organisation. However, there are microfinance
institutions. They are financial non-governmental organisations. Some are
for profit, some are not for profit. When you are a financial
non-governmental organisation, that is providing financial services,
especially micro-credit to the less-privileged or for those who are not
able to access funds from commercial banks, and you have cooperatives, they
are lumped together and branded as microfinance banks.

In essence, what you are trying to say is that there is a difference
between microfinance banks and microfinance institutions?

Yes, a clear definition. Microfinance banks are licensed by the CBN and
NDIC to operate. Microfinance institutions are not. They are not regulated
by the CBN. They have associations that regulate what they do. So they are
not the same. In the course of the year, the staff of the CBN would visit
microfinance banks to inspect our activities. They don’t do that with
microfinance institutions. They don’t do that with cooperative societies.
Maybe, that is why people sometimes, regard us as commercial banks and
another time, deposit banks. So they are two walls apart. What
distinguishes us from commercial banks is that our customers don’t come to
us, we go to them. That is why, when you look around now, you don’t see my
customers here. My members of staff have all gone out. You will see them coming back
in the evening. They are mopping cash from customers, and these customers
are active, they are doing something. They cannot afford the time to leave
their businesses to come to the bank.

Are microfinance banks not supposed to be community-based? Are they are not
supposed to operate in the rural areas? Why are a majority of the
microfinance banks located in the cities? We know that many rural
dwellers don’t have access to banks, why do you abandon them?

Well, that some of us are in the cities you cannot dispute that. But then,
I have told you that microfinance banks are profit-making organizations. So
why should I go to a rural community to operate where there is no road, no
water, no electricity?

But there is huge population in the rural areas that could be used to make
up for lack of infrastructure?

Well, we may not have our presence there but our presence is being felt
there. They will tell you that they have benefitted from loans from
microfinance banks.

For instance, do you go to satellite towns in Abuja such as Nyanya,
Gwagwalada, Kwali, Bwari, Kuje, among others for their operations?

Yes, we do. But there are three levels or categories of microfinance banks.
If you are a unit microfinance bank, you are licensed to operate within a
local government area. For example, I am here in Abuja Municipal Area
Council [AMAC] and I am not supposed to go beyond AMAC. That is the licence
I was given. So the communities in AMAC such as Kuchigworo, Galadimawa,
Gbaduma, Karu, these are areas we are supposed to go. However, if I am a
state bank, I have the wider reach. I will be able to cover all the six
area councils in Abuja. The law states that you would have covered
two-third of your environment before you can begin to cover other areas.
Then, if it is a national microfinance bank, you can operate anywhere. So
if you find yourself licensed to operate in a city, you can only operate in
that city. You are not allowed to go outside.
We that live in the city before we get to the rural communities, it is an
added cost on us to get these communities. The concentration is not only in
the cities. There are microfinance banks that are in the rural communities.
Go to many places, you will find the presence of microfinance banks. In the
areas where they not, you will not blame me for not going to site my
business in Taraba, Yobe or  Gombe state. It is not my fault. Before you
are given a licence, they will come and see your environment. So I chose
that I want to operate here, that does not make me not to get to the rural

Added to this, is the issue of giving loans for long term projects. What
is responsible for the failure of microfinance banks to give long term
loans to their customers?

If we have long-term funds, we should be able to lend long term. Our funds
are very short. That is why we keep clamouring that we need the kind of
funds where for example, I can go and borrow for 10 years, five years. Then I
can give loans for one year. I don’t have that kind of funds. Our funds are
very short term.

Following the re-capitalisation of microfinance banks as directed by the
CBN sometime ago, how has it been? I think the re-capitalisation was
initiated to enable microfinance banks to lend to their customers long

The re-capitalisation is the money to set you up. We need added funds for
us to be able to give long-term loans. What is N20million re-capitalisation
fund? We don’t have the funding to give long term loans. We pay rents,
staff and still give people money as loans. We now talk about the issue of
people not paying back. The little money you gave out, if they don’t pay
back, the N20million is eroded. So if it has been eroded, you need
additional fund to put in. The benefit of the N20million re-capitalization
is that some of us are surviving today because we have to re-capitalise.
That is the essence of the re-capitalisation. You cannot drive this process
with N20million. You need an additional fund. So if I get funds for six
months, I can lend for six months. Secondly, the attitude of our people to
save is not there. People do not save. If you don’t save, how do I know
that you will pay me back when I need it? So when you talk of giving you
loan, I have to go and buy it from somewhere at a cost and I must pay it
back at a cost. Because there is no saving, I don’t know your capacity. In
this situation, the implications are far-reaching. First, the capital is
eroded. Secondly, the income obtained in giving the loan is wiped out. And
the principal is threatened. We are surprised that nobody talks about the
attitude of the people we give money as loans. Many people do not pay back
their loans. It is not like that in other countries.

What is the percentage of those who default in paying back loans? Can you
quantify it?

I cannot quantify it because I do not have the statistics. What we know is
that majority of Nigerians don’t want to pay back the loans. That takes us
to another issue. If you don’t want to pay, I now employ people to go after
you, it is a cost. So at the end of the day, I am the one paying. We are
dying under the expenditure that you can see coming, which you do not have
control over it. So people do not pay back loans and that contributes to
the reason why microfinance banks are not doing well. The capital is
eroded. The income you made for granting the loan is wiped out. So you have
huge cost you are trying to recover.  At the end of the day, you have these
challenges, you cannot do well.

Let’s look at the issue of the current forex crisis, how has it impacted on
your operations?
We are restricted from foreign exchange. We do not go there. So I am not
able to talk about that. What we know that in the market, our customers
are complaining that the prices of goods are very high. They are not able
to sell their goods quickly to return the money. Really, they are making
losses. This is because the naira exchange rate has moved adversely.

What do you expect from the decisions of the National Economic Council and the CBN’s monetary policy?

The policy should be able to make money available to those that need the
money. Government needs to introduce some form of incentives. For example,
the charges for mobile money are even discouraging. If you to pay money
when you want to withdraw money from the banks, I do not know whether such
customers would like to come to the banks. And you want the customer to get
out his money from the pillow where he has hidden the money and bring it to
the bank. And the bank will now take a percentage of it and when I want it
back, and you take another one. You are impoverishing me. You are making me
to lose more money that I ought not to lose. The danger is that somebody
goes to steal that money. They should in a way encourage prospective
customers to come. They should see the benefits and their money will be
saved for them. It should be convenient and affordable for them. Those are
the three things a poor person will be looking for, in order to make them
to come into the formal financial system. As long as the fund is costly and
not affordable, as long as it is not convenient for them and they will not
be able to get it when they want it, it is mostly likely that they are not
going to come.
The policy should be such that encourages them. Let them experience these
things and when they, by extension, want micro credit, money to put in
their businesses to make them to continue to come into the banking
industry, the money should be available to them. So availability of the
fund is another thing. What can we do to get funds available to them? The
N220billion is there, how much of it has been accessed. I don’t know. I
don’t have the figure. But we do know that not many people have been able
to meet the requirements to be able to access the funds. You go to Bank of
Agriculture [BOA] to access loan, the forms alone to fill, and the waiting
period is too long. People will probably go to look for funds elsewhere.
These are the things that they should look into, so that people could
obtain loans to do their businesses and pay back.

As a financial expert, are you not worried that the present administration seems not to have an economic blueprint to drive the economy?

Well, if we worry from now till tomorrow, what can we do? They have said
they would produce it, we are waiting for them. This is almost one year into Buhari’s administration. I am not a politician. I don’t know how they operate. We are waiting for them. When it comes, we will look at it.

What are the implications of not having an economic blueprint?

I know that they have goals and agenda. What we want to find out probably
is where are the goals and agenda taking us to? We will wait. We will do
the assessment. For now, we don’t even know what it is. You will not assess
what you have not seen.

Madam, as you may have known, currently the inflation has increased to
double digits. According to National Bureau of Statistics, the Gross
Domestic Product growth rate [GDP] dropped from 6.2 per cent in 2014 to
2.11per cent in fourth quarter of 2015.The NBS also said recently that
unemployment has been on the increase. Considering these indicators, how
would you assess the economy and what is the consequence of not having
economic blueprint?

People are dying. There is suffering written on the faces of the citizens.
That’s all. We are not progressing. It is clear that people can hardly
afford meals. It is written all over people’s faces.





We need added funds for us to be able to give long-term loans. What is N20million re-capitalisation fund? We don’t have the funding to give long term loans. We pay rents, staff and still give people money as loans. We now talk about the issue of people not paying back.


N220billion is there, how much of it has been accessed. I don’t know. I
don’t have the figure. But we do know that not many people have been able
to meet the requirements to be able to access the funds. You go to Bank of Agriculture [BOA] to access loan, the forms alone to fill, and the waiting period is too long. People will probably go to look for funds elsewhere