The need for a change of attitude and mode of operations by operators cannot be overemphasised if the microfinance banks (MFBs) are to remain viable. Pauline Nsa, managing director, FBN MFB x-rays some of the challenges facing the sub-sector in this interview with Hope Moses-Ashike. Excerpt:
Reason MFBs not meeting up with capital requirement
I think is basically illiquidity and confidence on the side of the operators. There are some legacy issues. Legacy issues in the sense that some of the microfinance banks migrated from community banks, when the policy was formulated. Their operations did not change dramatically and they had a lot of bad loans, which weighed down on them and made it difficult to attract deposit.
Because they were not having deposits coming, their cost of fund was quite high. They go to banks and individuals to source fund at high cost and on-lend to their clients. It was difficult for a lot of them to operate that way for too long because it is not a sustainable way of operating because that high cost is also translated to the customers. The customers are in turn unable to repay those loans because of the cost, given the economic situation in the country. That ultimately added to their bad loans and their inability to meet the new capital requirement.
Acquisition
Whenever you are considering acquisition or merger, there is always some advantage you are looking for. For example, if you have a strong brand and we want to leverage on your brand to do something, to grow our business then there will be need for us to discuss acquisition, but if there is nothing other than going to get toxic loans, why would you want to acquire or merge.
Most organisations look for something that will bring them value when they want to acquire or merge. So, if there is no value, why would you want to acquire or merge.
Approach for mergers and acquisition
Yes, we were approached by one microfinance bank in Benin City and a few others, but we did not see much value in it so we rejected it. Beyond that, FBN
Microfinance Bank is owned wholly by FBN Holdings and we have never discussed the issue of diluting that investment.
Saving the sector from collapsing
Basically, what will save the sector is injecting fresh funds. However, the operators are different in the sense that you need to have trained people.
There are some issues that the CBN has tried to address. Issues like training to get some of the operators to speed. If the foundation itself is not right, you really cannot do much. If the same operators are still operating and have not changed the mode of operation, you cannot expect a dramatic change even if you bring fresh funds. Some of the investors have not been able to bring in money because they do not have the confidence that putting in money will bring any different result.
