Bunmi Lawson, managing director and chief executive officer, ACCION Microfinance Bank Limited, in this interview with VINCENT EKHATOR bears her mind on recent CBN’s reform and implications on microfinance banks

CBN’s recent banking reform 
When there is an earthquake, there is always an initial pause. But I am convinced that the banking sector, after the clean up exercise, would remain strong and safe because I believe that the action of the Central Bank of Nigeria (CBN) is in the best interest of the banking public and the nation in general. The removal of the managing directors and executive officers of five banks and the disclosures and publishing of debtors’ names was a shock. It is an issue that is quite surprising.
CBN and the Economic and Financial Crime Commission (EFCC) really need to give some of these debtors more time to liquidate some of their assets. This would enable them to effect payment because even when they have the money they may have to liquidate assets before upsetting their debts.

Challenges facing MFBs
When I look at MFBs generally, there are number of things that are glaring. The market is still very young and as a child, you would first learn how to crawl before you can work. Generally, people have been used to that rapid bank growth and MFBs may have also copied the big banks. So, that has led to some liquidity crunch because the capitalisation of MFBs is far smaller than the commercial banks and so, when you start using your capital to build gigantic branches, you may end up not having enough money for your target market.
I think that the problem, to a large extent, was not that they were not lending to the economically active poor but they were busy buying cars and building fancy houses instead of actually focusing more of their portfolio to lending activities or mobilisation of savings. The other thing is that micro finance banking as it should be practiced is not being properly practiced here in Nigeria.
The principle behind MFBs is that you give a lot of small loans and you should ensure that you have a steady capital base that would enable you meet any liquidity problems at any point in time. Most MFBs operators are regrettably not too conscious about their lending processes. They give loans to too many people without proper monitoring and at the end of the day, what you would hear are issues of bad loans.
MFB operators lend to Small and Medium Enterprises (SMEs) and instead of giving to say 10 people, they actually loan to over 10,000 clients and before you know it, there would be cash problem. As you know, MFBs are still very new and people are not yet putting much deposits into them. So, they do not have huge credit to give out to the active poor and they do not have enough funds from the commercial banks. All of that just made it to be a bit difficult for them.

CBN stress test 
Generally, the financial industry needs to be sanitized. There is need for proper clean up. I have confidence that within a short period our financial sector would be solid. The regulatory bodies should not just sanitise commercial banks alone, the MFBs, the Bureau De Change (BDCs) and the mortgage banks should all be cleaned up to allow for efficiency and good corporate governance.
We once had the CBN inspection, so the stress test is not new to us. We have already started and because of our size in AMfB, with capitalisation of over N1.2 billion, over 30,000 customers and a very strong  shareholders’ base, we are very confident that whatever the assessment, AMfB would definitely have an edge. The good thing is that such stress test would ensure that MFBs in Nigeria are better focused and would ensure good delivery of MFBs objectives.

AMfB
Micro financing is all about giving small loans to micro-entrepreneurs and AMfB is very careful about ensuring that our customer’s repayment rate remains stable. We are not particular about big outfits and people keep saying that they do not know AMfB. The truth of the matter is that we do not make any noise. We allow our professionalism and good customer services to speak for us and we ensure that we are liquid enough for grassroot banking as well as empowering small entrepreneurs.  
We would ensure that AMfB remains the market leader and we would continue to serve our customers because we believe that despite these global financial challenges, opportunities abound.

Mergers and acquisitions
For now we have to be very careful because we would not want to merge with any MFB and regret it later. So many of them would tell you that they have performing loans and at the end of the day you would get to find out they do not even have up to the required capital base. The truth of the matter is that so many of them have a lot of bad loans. We are actually very careful because the key issue is that if we must merge or acquire any bank in the nearest future, we must ensure that such bank or banks have similar values as AMfB and that is the base line and we are not going to be looking at acquiring collapsing MFBs. We would be going after strong banks because that would also make us stronger. That, in a clear statement, is our guiding principle.
I think that the problem and the root cause of monitoring microfinance banks is their size. The number of microfinance banks is alarming. They are over 860 and spread across the country. It is a department of the CBN that is monitoring them. There is certainly no way they would ensure adequate supervision. The number is actually beyond what the CBN can adequately control so I would suggest that the CBN should encourage consolidation to provide for fewer but stronger and more efficient microfinance banks that would deliver on its objectives. The Association of Microfinance Banks of Nigeria should also be empowered by the regulatory body so that they could also become self regulatory.

Corporate governance
For us in AMfB, corporate governance remains a key issue. Our mission is to become a market leader and one of the things we did was to ask ourselves what we need to do to become a market leader. All through our work, strong corporate governance has remained a very important issue. We ensured that the kind of people we put on the board are distinguished personalities. We have value for whatever we do. Some of our key issues are integrity and leadership. It is about being sustainable and so we ensure that members of our board have the professional competence to actually carry on with MFB work.
The second key issue is to ensure a strong management team and to ensure that there is good structure in place that would guide against unnecessary unethical practices. We have been able to inculcate in the members of our management team that for the business to last, it is not just about declaring huge profit. We tried to tell them that if we must continue with this business, we should be able to add values to the society by promoting good corporate governance and we try as much as possible to choose the right people to partner with. When you look at the organisation that we partner with, they are very strong. We are talking of organizations such as Citibank, with very good corporate governance, Ecobank, ACION International that has been in business for 45 years. So, you do not get that long without having strong values.

Plans on branch expansion programme
We are actually mapping out plans to expand our network base and once we finish all the legal issues, we would apply through the CBN to become a state MFB. Even though we are not going to start new branches outside Lagos, it is our plans to cover the whole of Nigeria and that is something that we are working towards. Our relationship with our customers has been very cordial and their repayment capability is most satisfactory.  

Proliferation of MFBs
The CBN really need to reduce the numbers of MFBs in the country. It is now clear that the CBN was trying to address the issue of spread and even now with over 860 MFBs, over 70 per cent of them are actually in the South-East or South-West. It is obvious that their concentration is quite high. In some places in the North, you could barely find any microfinance bank. But again the number is not the issue what we should be doing is to encourage large numbers of branches.
CBN says that as a state MFB, you must have at least a reasonable number of branches with proper management team and facilities to ensure good delivery of MFB functions. Even when we are applying for a state bank, we should definitely know that we must establish branches in other states because CBN encourages spread of MFBs. To remain in a particular state is actually not a good idea because the concern of the CBN is to spread.
The truth of the matter is that we do not need to have 860 MFBs. We can have 100 or 50 MFBs, but they should have 8 to 60 branches each, all spread across the country.
The debate about how many banks you need should not be an issue. When we talk about the commercial banks in the United States of America, you would find out that they have a lot of banks but when you go to some other places like the United Kingdom, you would find out that there are very limited numbers of banks and most of them are really very viable. So, I suggests that the CBN should look inward and really address this issue of spread.

Need for smaller banks
To me I do not think that we are ripe enough for fewer banks at the commercial level. That was part of what affected the rapid growth of our banks. We need to develop better competence to handle big projects. Our banks need to be evaluated in order to be able to deal with projects of N100 billion or more. But to some extent, quite a number of them are trying in this regard. Before now, if a bank wants to service a firm like LNG, it would be talking to other big banks abroad. Apart from the financial aspect, they equally need the expertise to carry out such projects. So, even if we are going to have 15 banks, it has to take a long time. Until we are convinced of their competence and skills, we are not going to have that.

Government support to MFBs
The federal government should provide an enabling environment for MFBs to thrive. They should support us with technical training. We really do not need much financial support from them. What we need is an environment that would support MFBs.
I am not entirely in support of federal government funding of MFBs, because to me, it may lead to customers taking a share of the national cake and that may lead to non-repayment rate. Government should focus more on creating an enabling environment that would attract people who have experience.
They should sponsor operators of MFBs abroad where they would be able to learn more on microfinance business. Government should partner our association and other government agencies. They should organise conferences and workshops to further equip operators on how best they can deliver on their core objectives.