“MOST OF THE MICRO FINANCE BANKS IN NIGERIA DO NOT UNDERSTAND THE CONCEPT OF MICRO FINANCING” – Mr Aminu Philip Yado, The Managing Director/Chief Executive Officer, HAMDA Micro Finance Bank, Kwoi, Southern Kaduna.

The Nigerian government recognized the need to encourage small enterprises through the provision of credit facilities and this informed policy reforms that brought about the Microfinance bank that the Federal Government of Nigeria introduced during the President Olusegun Obasanjo regime to replace the former community banks in Nigeria and the policy became operational in the year 2005. Microfinance banks are established to fill in the gap created by the formal financial sector by improving the socio-economic condition of the poor income generation.

 Thus the concept of micro finance banking ordinarily was meant to afford micro business sector in Nigeria an opportunity to thrive, to provide financial muscle for the mostly rural businesses. It is however very sad to observe that many of the supposed micro finance banks have collapsed, leaving millions of rural and micro based depositors in unbearable financial conditions; they cannot access their deposits and their businesses in turn have had to hit the rocks. What really happened to the micro finance banks? Where did they get it wrong?

In our attempt to unravel the reasons for such negative trend, COUNTDOWN Assistant Editor, Seyi Arowosebe went after a success story, in one of the few TRULY microfinance banks in the country, HAMDA Micro Finance Bank, Kwoi, Southern Kaduna. The managing Director, Mr. Aminu Philip Yado, on 22nd June, 2018 gave us an in-depth insight as to why many of the microfinance banks had to go under. Their locations, their volume of transactions and lack of understanding of the concept of microfinancing among others are major factors. It promises to be a wonderful reading. Enjoy the excerpts.

CD: Can we meet you sir, your name, schools attended, career experience and background?

MR YADO: I was born in Kwoi in 1963. I attended Mallam Maude Primary School, Kwoi (1970-1976) from there I was admitted to Govt Secondary School, Funtua (1976-1981). I did my IJMB at the College of Advanced Studies, Zaria (1981-1983) I Studied Business Administration at Ahmadu Bello University, Zaria (1983-1986). I served in Nigeria Navy Secondary School, Navy Town, Ojo, Lagos. I was employed at the Nigeria International Bank (NIB), also known as Citi Bank from 1987 to 1991, and from there I joined Oceanic Bank in Lagos and was posted to Kano as the pioneer Head of Operations in the North where I served for almost nine years before I moved to Citizens Bank, Kaduna. Afterward, I joined Hallmark Bank and worked in the Northern Area Operations before being posted to Lagos as the Training Manager. Sometime in 2003, I was transferred to Kano to open the first branch of Hallmark Bank in Kano. By 2005, Hallmark Bank could not consolidate, so they went under, but I was able to move to UBA where I served for two years as their Area Operations Manager covering the whole states of the North East, Adamawa, Taraba, Gombe and part of Bornu. For some reason, I had to leave. I managed Ajiya Microfinance Bank, Kaduna from 2008 to 2010. Eventually, I left to start a pure water business in Shiroro LGA of Niger State. It is from this pure water business that I decided to contribute my quota and appreciate my community for what they have done to make me what I am today. I am a certified Microfinance practitioner (MCIB). In 2016, I was in Italy on training on ITC/ILO training program on microfinance.

CD: With the high rate of rural-urban migration, why your choice to set up in a local community, instead of the city where everything seems to be rosy?

MR YADO: The basic concept about microfinance bank has not been understood by a lot of people. Microfinance bank is to capture the people that have not been properly captured in the formal financial system; people that do not have access to formal banking services. In the cities, there are banks everywhere, although there could be reasons why people in the city might not have bank accounts, perhaps because of their economic status. But microfinance banks are meant for the unserved/underserved people, the economic active poor who are excluded from financial services access by virtue of their economic status, culture, religion etc. If you are able to empower them, it will even discourage the rural urban migration.

CD: What is the nature of business(es) you have been able to finance and support to become better since the inception of your microfinance bank?

MR YADO: We go to the micro-businesses, small businesses, to an extent medium scale businesses. We look at artisans, all kind of economic activities that the very poor really undertake; the people who make Dawadawa (a local magi flavour), truck pushers, etc. We empower these people first so that they could have a means of livelihood. We encourage them to save money and invest through those activities. We empower them so that they can realize their potential in life at the low level they found themselves.

CD: What do your facts behind the books look like? Have you been able to make any profits on your turnover? Is it lucrative doing business with locals?

MR YADO: The microfinance business is a lucrative business so to say. It is when you understand the real business you are there to do. Most of them that are set up in the urban areas are not really doing microfinancing; they are doing something you call the retail end of the commercial banking services that is done in commercial banks. But then the poor people are human beings just like the rich people, and everything that the rich people enjoy, the poor people also enjoy them. But the poor enjoy them in very small unit just as they have small income. So they need the banks, they need money to do business, they need to save money in anticipation of whatever might happen in future, they also need capital to be able to execute their projects, they need insurance services and others, so by the time we are able to supply them with those products, and give them a convenient repayment plan, you will find out that they are paying you without default and on schedule and you are making good money out of it. Of course you charge them registration fees, and maintenance fees, and once it is convenient for them, all which they are after is access to fund, they will pay all that is required of them. Thus, it is a lucrative business.

CD: Many, if not most of the microfinance banks in the country are facing difficult times now and it seems they got something wrong somewhere, how were you able to stay afloat, what are you doing differently?

MR YADO: Like I said earlier, most of them do not really understand the concept of microfinancing, what they do is to go for the retail end of the commercial service products of conventional banking. In our own case, we don’t believe in giving like N200,000 (Two Hundred Thousand Naira) only to an individual. It is very rare that we give up to N200,000 (Two Hundred Thousand Naira) only to an individual. But we sponsor them in small amount that they need to run. For example, an akara (beans cake) seller does not need N200,000 (Two Hundred Thousand Naira) only to run a business, she needs basic empowerment. If you spread the repayment to her convenience, once she has access to funds, she will not mind paying you with all the commission that you charge her, as long as it is convenient for her. Again, it is not a cheap business to do, when you offer a facility of N10,000 (Ten Thousand Naira) only to that akara seller, it is the same paperwork you use to draw up the facility for her that you will use to draw up a N1,000,000 (One Million Naira) only facility. We have modalities that we follow; what we also do is funding them in groups and not individually, giving them small amount of money in groups and monitor them well.

CD: How will you describe the intervention of the FGN in agriculture vis-a-vis the activities of microfinance banks in the past three years?

MR YADO: As far as I am concerned, the intervention of the federal government in agriculture in my own area has not been very effective. I can’t really mention one intervention fund whether from the Micro Small Medium Enterprises Development Fund (MSMEDF) which is not basically for Agric. The one that is even meant for Agric, we have not even had access to it. All the same, they still have products that they try to sell to the MFB, and if we are able to meet up with their terms, we will access them. As a bank, we have not been able to access those intervention funds.

CD: What peculiar challenge (s) do you think is facing the small-scale enterprises in Nigeria today?

MR YADO: The challenges they face today are that a lot of them do not have the basic entrepreneurial skills; they don’t have training in basic record keeping, and proper accounting. And once you are not able to keep basic records, you don’t understand basic accounting ethics/ethos, it becomes a problem. They have access to funds but they are ignorant of what is really going on, because the microfinance banks are there to meet their pressing needs.

CD: Aside from financing, what do you think the regulatory bodies can do to improve the performances of microfinance institutions in Nigeria?

MR YADO: The regulatory bodies do not really finance the microfinance banks; they regulate by setting standards and ensuring that microfinance banks meet those standards. They set those standards because microfinance banks are in the business of collecting money from the public, for safekeeping and then lending to others. If they don’t set the standards and ensure that they are followed, the monies may get missing, and then you throw the larger population who are poor into a problem. So they don’t really do funding, they perform oversight functions of supervising the activities of the microfinance banks, to ensure that they manage people’s money properly.

CD: What are your dreams and aspirations in the near future as a microfinance bank?

MR YADO: As it is today, HAMDA microfinance bank is a unit microfinance bank, but we plan to convert to a state microfinance bank, where we will be able to operate not only in Jaba local government, but to open branches in other local governments where we wish to operate in the state.

CD: Who are your stakeholders/core investors and what makes them stand out?

MR YADO: The Stakeholders and core investors are the indigenes who really have the interest of the people at heart. HAMDA microfinance bank is blessed with a vibrant and forward-looking Board who are interested in helping the community to develop in their local businesses. Other Shareholders include Community Development Associations, etc. These are the people who have the interest of the community that we are serving at heart. They have shares in the bank. Thus they invested their little savings to ensure that we empower the people of the community.

CD: If you were to give a piece of advice to President Buhari on the diversification of the Nigerian economy, what will that advice be?

MR YADO: It is a good program. But agriculture is not just rice and tomatoes. We have other things that have not been harnessed. Talking from the background where I am coming from, we have Ginger, the best kind you can find in the whole world, but I am surprised this has not been considered, and it is in high demand right now. It is valuable for consumption and for medicine. My advice will be for a policy to bring ginger and other major cash crops to the limelight as they did for yam recently. The Agricultural Revolution should not be given lip service alone but specific actions should be taken to actualise the promises.

CD: Thank you for your time.

MR YADO: You are welcome, it is my pleasure.

COUNTDOWN

By:Mr Aminu Philip Yado, Interview with Countdown