The Managing Director, NIRSAL Microfinance Bank, Mr. Abubakar Abdulahi Kure, in this interview with ABDULWAHAB ISA, speaks on the unending quest by Nigerians to access loans, among other issues
It’s been two years since NIRSAL came into being. How has it fared in terms of carrying out its core mandate?
Our conceptualisation is with the support of CBN Governor, Dr. Godwin Emefiele, essentially to help those at the lower level of the economy.
The idea is to create jobs, provide and create affordable and accessible loans and also to grow the economy effectively. What I have found out is, people think this is a public fund. There is poor perception around it, which could pose a danger on recoveries. Some people feel it’s a national cake.
There would be challenges around recoveries. We also have scammers around the products. Because people are desperate; because demand supersedes supply and the fund is limited, people get scammed. The other aspect is around numbers. I must tell you, it is not easy to do numbers in terms of volume.
We have significant volumes, which most commercial banks are doing. As I speak to you, we have done over one million loans to Nigerians.
The number range from Anchor Borrower, we have done argic loans; we have done youth investment scheme. Put all these loans together, we are talking of over N600 billion given to over one million Nigerians.
When you look at the banking system and granting of loan facilities, it’s a major challenge.
We have to ensure the system works right, we need to ensure the system has the capacity around the volume and, naturally, because people are involved, there are a lot of complaints here and there regarding accessibility. Occasionally, we also have some operational issues with volumes because we are dealing with bulk payment. All these are challenges we face.
We thank God we are able to confront it and we are waxing stronger. I have seen people confessing that if not for Nirsal Microfinance Bank, the Nigerian economy wouldn’t have come out of lockdown; Nigeria would have locked down completely.
We are seeing recoveries in output and this is significant. As a result of loans we are giving, factories are back in operations producing goods and people are being impacted economically to buy the goods. In the area of inflation, we have helped as well.
Once we give people a loan, some channel to their farm. This boosts supply of goods and services. Essentially, you find out as time goes by, people get these goods at affordable prices.
Employment would be created and poverty is reduced. It helps to conserve forex. People have started producing and exporting toothpicks instead of importing them.
I am aware some SMEs are exporting to other African countries through our loans they got. These are some of my experiences. I believe Nigerians are happy with us.
We have received over ten awards. We didn’t go out of our ways to ask people to give us awards. People felt our impact and on their own decided that we have impacted their lives.
Our activities provide satisfaction. Because the bank is empowering people, impacting lives, the economy is also benefiting by way of growth. By design, the bank was to have branches in all 774 local governments across the country. What is the total number of the branches today?
It is not easy to grow branches. We have achieved some milestones. Currently, we are in about 115 branches. Effectively, we have one branch in each state. Some states have two, some three, depending on the size. It’s a gradual process. You know resources are limited. Very soon we would reach 774 local governments. We would effectively expand.
It could be through digital technology, agency banking that is what we are looking at. If we say we are going to have a station in each of the 774 local governments that is the target.
It might not be immediate because of the limited resources. What we are trying to do is to provide outreach and depth of banking through the use of technology. Eventually we would have a physical presence.
The immediate objective now is for Nigerians to have an impact on our products. We have done 115 branches.
The goal is to reach 774. It’s a j o u r n e y that we have started and I t h i n k not many banks in Nigeria could have done that number within two years.
You can’t get a n y bank that would have expanded 115 branches within two years. You can’t get any bank that would have done SME loans of over N600 billion, we are almost over N700 billion within two years.
Banks don’t do SME loans because of the risk associated with defaults to these loans. Here we are doing SMEs loans at a cost-effective money.
We were doing five per cent during Covid 19 and now nine per cent after Covid. Conditions for loans are not even there. This is done to give ordinary Nigerians a window.
Conventional banks would ask you to bring collateral; to bring guarantor and your bank would ask for your statement so as to know if you can pay through cash flow evaluation. We have no such requirements
What’s the progress in terms of loan recovery? How much has been recovered by the bank in the last one year?
On loan repayment, we thank God some people who were able to use the loan very well in terms of creating assets that can generate income are paying despite a one year moratorium, which was later extended to two years.
Currently, the moratorium would expire by March 2022. By March, we expect the economy already unlocked, people are going about their businesses, no restrictions whatsoever. We expect people to start paying.
Why the moratorium was there was because the economy was locked down and you can’t go out to do your business. Now you can go out to do exchange of goods and services.
Now we expect people to start paying back by March 2022 and if you don’t pay, there are penalties around it. We report you to the Nigeria Credit Bureau (NCB). That means you cannot take out a loan in any banking system because you have defaulted in a way.
Secondly, we would activate global standing instructions. What that means is that anywhere you have a credit balance or deposit in the banking system, irrespective of where the account is, your account would be debited based on your organization schedule.
And we are also thinking that once we report you to the credit bureau you cannot get any loan again. We would also publish your name in the national newspapers that you took loan from NMFB and that you are not paying, and then you will be embarrassed.
This loan is given to some people who ordinarily would never have had that money because they are poor. Poor because conventional banks would say bring all those pre-conditions but in order to allow accessibility, we removed it.
Nigerians also have the obligation in ensuring that since the government wants to help them have access, change their lives, empower themselves, they also have obligations around repayment so that other people can get. It’s a recycling law. If you don’t pay back others won’t get the loan. We will black list you, blacklist your BVN. Some people chose to divert the loan to improper things against what it’s meant for.
We will black list your BVN. That means you can’t do business in the banking system, can’t use ATMs. You will be forced to go and pay back our loan. I want to tell Nigerians that if you use this loan very well, if you use it for assets that can generate income, it’s guaranteed to generate income.
It is not money meant for servicing girlfriends, buying clothes, marrying wives that is not the perception. The perception is to improve your life. If you think collecting this loan is part of your national cake you are getting it wrong. I call on Nigerians to take this as a cross guarantee in the sense that, if you see someone that took an NMFB loan, tell him to pay because you also need this loan.
As I am speaking to you now, we have even shot our portal for the conventional TCF. I have over 7 million people outstanding on our portal. You can see the demand for it is high and it is a success story through inception. I am pleading with those who get it to know it is a privilege by the government through CBN that they should use the loan very well and pay back.
The bank’s interest rate charges on loans is pegged at five per cent cap. Is this a statutory figure or is it subject to variation as obtained in conventional banks?
The interest rate may be reviewed upward as time goes on due to the inflation factor.
What I can say is that comparatively it will never be like commercial banks because the objective of this place is to look at those that are at the lower level of the economy and under privileged. You cannot give them loans at high cost because they do not even have the capacity to take loans at high cost.
Ordinarily, by rules of conventional banking, they are supposed to pay prevailing interest banking rates because the risk is high.
The higher the risk of the loan you are giving, the higher the interest. However, here because we want to ensure accessibility, we want to help and empower ordinary persons, we are not likely to increase it. Is it possible to increase?
I can’t say because some of these loans are structured loans guided by CBN’s policy. If the CBN says increase, then so be it. But I can say confidently that it would be much lower than that of the conventional bank because of accessibility to help ordinary Nigerians.
Could you throw light on the free interest loan scheme initiative of the bank? What does the bank intend to achieve and how is the repayment plan structured?
The interest free loan is introduced to help take care of people who could not assess the conventional loans. From their own perception, they don’t want to go through conventional loans because of the interest bearing. Non-interest banking was introduced in the interest of the people in the northwest and northeast.
The concept is asset financing. We don’t give cash. It is not about interest. That is not to say that there is no cost of funds. There is a cost of funds but it is about asset financing.
We are not giving cash. Some people feel money is a commodity. Money is not a commodity. This is the concept of Islamic banking. What they do is, they share profit or losses.
They share risk that is inherent in that business. If the business makes a profit or loss, it is shared between the business owner and the bank. So, the concept is that instead of interest bearing, it is risk shearing. It can be loss or profit. But people have misconceptions about the non interest bank.
People think it is cash. We started it sometime around April and we have gotten some numbers. As I’m speaking to you, we have over 10,000 beneficiaries and we are going to cover around N12 billion and the numbers will continue to grow. We also have 3million Nigerian waiting on our portal for the non interest banking loan. The idea is to allow those ordinary who don’t take the conventional banking loan to take that loan and that is not to say it’s restricted to only Muslims. Both muslins and Christians can access. They are free. Our rule here is that if you had taken an agric low interest conventional COVID loan, you cannot take a free interest loan. The idea is to give a wider spread opportunity for others and some people will not be able to take the loan while one person will be there that has not taken. If you have taken Covid- 19 loan or the agric loan you are not qualified for our interest free microfinance loan.
We read in the papers that your bank had stopped household loans. Some people complained they had applied for the facility for months with no response. Has your bank stopped TGF and SMEs loans?
We are still doing Covid-19 loans. it’s just that the demand is more than the supply. As I speak to you now, we have more than seven million Nigerians looking for Covid loan. We have shut the portal since around April this year.
We shut it much earlier and re-opened it again in order to have a geographical spread.
So, if you look at demand for it compared to limited resources available, people would complain. But what we try to do, is to ensure geographical spread so that within the six geographical regions of Nigeria, there is equal spread. We recognize some regions have more population than others.
For instance, northwest might be slightly higher than south- south. In terms of value, they are very close. It is not possible for us to give everybody; the resources are not there. Even CBN that has been helping in the social intervention fund, they are also getting overwhelmed. Instead of injecting more funds we should work on recoveries and whatever we have we should recycle it.
The impact has been significant both in terms of empowering people and poverty reduction. It’s helping the economy, conserving forex exchange and job creation.
Some of the products we gave people used to create those things that would have been imported. Some do exportation and that would help protect the value of naira. We would continue to do, but those who don’t should be patient and hope for the availability of funds.
As the pioneer MD of NIRSAL, how would you want to be remembered?
I am happy to be here. I must tell you it is very challenging but I am happy to be here because I have empowered people and at my level now, what I need is to be giving back as my legacy.
Ordinary people who I don’t even know are touched by what we are doing. That in itself, gives me satisfaction.
Life itself is not about you but about what legacy you want to leave behind. People who are wise and got the loan would change their life. Dangote started with N500,000, but today, he is number one billionaire in Africa.
Sometimes, it is not about the amount you start with. I am happy I have given support to ordinary Nigerians to change their lives.
When somebody collects this money and marries more wives, that can’t help you. You are increasing your liability. If you take the money and buy a car for riding, it is not generating values.
Some buy clothes with it. But those who want to do genuine business and invest the money, on assets that can generate income, I think it is a game changer. I am happy to hear that I am empowering people and changing lives. That in itself, gives me satisfaction.
What sort of relationship exists between NIRSAL Plc and NIRSAL Microfinance Bank?
NIRSAL Microfinance Bank is set up by Bankers’ Committee and the governor of CBN is the Chairman of Bankers’ Committee. CBN has an oversight, but they are not shareholders of the bank.
The share structure gives bankers’ committee 75 per cent of ownership, NIRSAL plc 15 per cent and NIPOST 10 per cent. Essentially the bankers committee has 75 per cent, NIRSAL has 15 per cent.
The NIRSAL Plc is an institution for de-risking loans, especially agric loans. For the post office, we are leveraging their branches, they have outreach because of branches. You know we are supposed to go into 774 local governments- one per each local government and NIPOST has the reach to get there effectively.
We are using their assets in terms of physical presence to leverage and collaborate so that we can expand to the 774 local government.
Essentially, that is the connection between us and we have a lot of support from CBN, which helps in promoting the objective of regulatory and financial stability.