Unlicensed Co-operatives Disturbing

Micro Banks' Business in Nigeria

– Fortis –

Interview
Mr. Henry Nwawuba is an executive director at the Fortis Micro Finance Bank. In this
interview, he says the proliferation of thrift based co-operative groups is creating bad
impression of the micro finance banks in Nigeria. He also speaks on collateral and why
the CBN should disburse the N50bn promised by the government and step in to control
nefarious activities of unlicensed financial institutions.

Many Nigerians are still unable to benefit from the services rendered by the MFBs,
while other MFBs are asking for collateral. What is your reaction to this?

You are absolutely correct. In fact the policy says we should provide collateral free
lending. And in Fortis, we look at cash flow unlike in the universal banks. Collateral is
what you fall back on in case of default. We look at ourselves as the best business support
bank of Nigerian origin. What we look at predominantly in Fortis is cash flow and not
collateral. You also look at character and the nature of business. We also concentrate on
women. But before we give out loans we assess, evaluate and verify. The process is
rigorous.

Can you tell us about your operation?

Fortis started operation on 22nd of October in 2007. We are unique because we have a
particular bias on some businesses with emphasis on micro credit and going into small
businesses basically made up of women, artisans and cooperatives.

How would you describe your outreach?

At the moment, we are operating in FCT. We have about 11 business offices. We are in
FCT because that is the licence that we have for now. We have a partnership with a
commercial bank in case our customers need to transact out of the FCT.

What is your capital base like now?

We have a unit licence and over time we have had the cause to increase our capital base.
We have gradually and consistently been increasing our capital and shareholder base over
the years. We started with the mandatory N20 million for the unit licence and as at
December last year we increased our authorised share to N1.2billion.
So far, how many clients have you and what has been your relationship with them?

Our customer base is growing. In the beginning when we started we were growing at
about 2,000 a week and it's been growing consistently. You know micro finance bank is a
game of number. This is different from universal banks which deal in volume.

There is a report that says you need to have up to 70,000 customers before you can say
you have started the journey. We are hungry to grow our capital base like others. Of
course like others in Nigeria we have our challenges. One of them is extra over heads
perhaps you know have been there.

You also have costs. You know all the banks are offering almost the same services, so to
compete you have to introduce other unique services. In Fortis, we want to support
businesses and so we have open shop in all the major markets. In supporting businesses,
the businesses are getting more sophisticated. Some of them go to China, some to Dubai
and some have supplies from Lagos. There is also staffing challenges. It is very difficult
to find trained and competent staff on MFBs, and when you have done that and train
them and retrain them, you will see the commercial banks showing up and taken away
these guys and doubling their salaries. The next day you are back to square one and start
looking for competent hands. You now start training them again and start investing in
human capital. Another problem is power. We have to run on diesel in our offices to keep
our networks.

What is your staff strength like?

We work with NDE (National Directorate of Employment), where they afford graduates
the opportunities to come here for training and we give them a period of 90 days or three
months to serve in Fortis where we pay them on an agreed sum. These people are
screened by the NDE. And at the end of that those that are found worthy are retained.

We also do the same for NYSC members. Under this scheme we have probably trained
about 500 people. Only people that deserve are retained while others can keep that in
their CVs, at least they have the experience and that may make them more marketers. But
we have about 300 staff strength. As the business grows some of the dynamics will grow.

Do you have liquidity problem? I asked this question because I know that you are
suppose to benefit from the N50billion set aside by the government to promote
micro banks.

The CBN and NDIC have really been supporting the banks in terms of training and
examinations. On the N50billion, I think the regulatory framework that set up one percent
of states budget would be earmarked for on-lending through micro finance banks.

The commercial banks were also expected to gather certain percentage of their profit to
support micro credit. We learn that the money has been gathered but has not been
disbursed. We have been waiting for disbursement. We are hoping than the money will
soon be made available to us for on-lending.
What is your assessment of Central Bank reforms of the banking sector?

We are very happy with what is happening particularly in the area of corporate
governance. But it will be nice to address the issue of unregistered or unlicensed financial
institutions. There are some cooperatives that are creating perception problems for micro
finance banks. They are not MFBs but they are basically multipurpose thrift and saving
organisations.

They are trading and masquerading as micro finance banks to the point that the public are
unable to differentiate micro finance banks from cooperative society. We would like the
CBN to address this issue because it is creating a perception problem for Nigerians.

How much have you disbursed so far to customers and how do you want the CBN to
address the intrusion of cooperative groups in the activities of micro finance banks?

One of the objectives of the regulation that set up the micro finance banks was to increase
micro credit in the economy from 0.9 in 2005 per cent to about 20 per cent lending from
micro finance banks by 2020. Indeed we are trying to play our card along that direction. I
remember within the first year we started our business; we came out to announce that we
have hit a one billion dollar mark. You see lending is something that is also dynamics. It
goes up and down.

The peak periods are always festive periods. But what we have done was to concentrate
on cooperatives to make them bankable. For the confusion by cooperative groups, the
first thing is to adhere to the prudential guidelines of the CBN. The CBN wants your
business to always be there. We are looking to our regulators to step in to say there is a
difference between a licensed MFBs and cooperatives that is not licensed, masquerading
and collecting money from people. For now it's been relatively stable.