Obinna Ukachukwu is the Managing Director, Advans La Fayette, Microfinance Bank, MfB, which recently opened its first branch in Lagos. In this interview, he spoke on the necessity for recapitalisation in the MfB sub-sector and why it took Advans La Fayette MfB, seven years before it opened its first Lagos branch. He also shares his thoughts on the role of the NIRSAL MfB sponsored by the Bankers Committee. Obinna Ukachukwu Excerpt: ADVERTISING By Providence Emmanuel WHAT is your assessment of the MfB sub-sector in Nigeria? The Nigerian microfinance space is very fragmented. We have small players and their size does not enable them to do what MfB institutions are supposed to do. I think that is why the CBN is calling for recapitalization in the sub-sector.
What then is the future of financial inclusion if most MfBs are unable to recapitalize? If some MfBs cannot recapitalize and they have to merge or be acquired, it doesn’t mean that their outlets would close down. So, for financial inclusion, you need wide distribution space, you need market penetration. So all those outlets would still remain, just that the institutions would be more solid and as they get bigger, there would be more of corporate governance and we would be able to provide more trust for depositors in the sector. The future of financing in Nigeria is microfinance. Even the commercial banks, I believe they would go into microfinance. That is the future of Nigeria. Small and Medium Enterprises, SMEs, in Nigeria makes up to over 90 percent of the businesses we have, so we have to create financial institutions for them because that is the future of finance in Nigeria.
Why is NIRSAL seen as a competitor with existing National MfBs? Well, I think we would take everybody that want to enable the sub sector, I don’t think it is a competition just that they have an unfair advantage of having very cheap capital. But they are more focused on agric. There are a lot of other sectors that need funding. So if we can’t really compete in the agric space and Nigeria Incentive-Based Risk-Sharing System for Agricultural Lending (NIRSAL) is covering everything, we are happy, because our goal is to ensure everybody is covered, it is not just to make money. So if NIRSAL can do the work, great, we would focus on other sectors. Repackaging microfinance banking for impact(Opens in a new browser tab) What is the experience of your bank in terms of accessing the intervention funds? We are trying, but it has been difficult, the conditions are a little bit onerous, but we are trying our best to see how we can really partner with those organizations and development finance institutions that are bringing cheap funds to fund the MfB sub sector. We are trying our best, soon we would be coming up with something, with the Development Bank of Nigeria, DBN, and we move on from there.
How is the CBN policy regulation impacting the MfB sub sector? I think the Central Bank of Nigeria, CBN, should regulate more and better. Regulation is a little bit weak, they have started improving by asking for recapitalization. Good regulation would make only the good player stay.
Why did it take your bank seven years to open a branch in Lagos? We needed to understand the Nigerian market. We are a profitable bank, we have grown in the South West, in Oyo, Ilorin and Ibadan. We are methodical in our approach and because we are long term focused, we want to get our root deep before we launch out to the big market. Now we think we are well positioned after nine branches outside Lagos, we think we are well positioned to bring the game into Lagos.
What are your expectations? My expectation is that in the next 18 months, our portfolio in Lagos would be bigger than our portfolio outside Lagos. So we should expand aggressively in Lagos. We understand the method, we know what we are doing and we are all about sustainability and inclusion. Lagos would grow, Lagos would feel our impact, the reason why we are doing business is right, we are not in Lagos to make money per say, but to make sustainable impact and I think our clients would be attracted to us that way. How many Nigerians have your bank impacted especially in Ibadan where it started? We have over 40, 000 clients and a lot of borrowing clients at the moment. We are very transparent; we don’t steal from our customers. I think that is the most important thing and our customers show so much interest in us as a result.
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