Monday, 19 November 2012 00:00
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“Unlicensed moneylenders soil our business”

Jide Aremo is a seasoned banker of many years, he however verred into microfinance banking by setting Supreme Microfinance Bank Ltd.

Now as managing director of the bank, he said there are several challenges involved in microfinance banking. One of such is the menace of unlicensed moneylenders. He shared his thoughts on the challenges with ABIODUN ADEWALE

Can we meet you sir?
My name is Jide Aremo, I am the Managing Director/ CEO of Supreme Micro Finance Bank Ltd. I have been a banker all my life. I have worked in various financial institutions in Nigeria and overseas. I worked with Banque Internationale in Benin Republic, it is a universal bank. I worked there for about 12 years.

I took early retirement in 2009 and since that time, I have been on my own. By the grace of God, we started Supreme Microfinance Bank after we got approval from the Central Bank of Nigeria. We started in June 2010; we are two years and five months old. At the end of this year, we will be two and half month old.

What are the various products of Supreme Microfinance Bank?
We have a lot of products; if you look at our fliers we have nine assets products and nine liability products. The flagship of our liability products are deposit of various types like fixed deposit. We have various asset products we create asset for people, we give them loans. We have our own Esusu version.

We have a modified Esusu, which we call quick-quick. Within 24 hours you get the amount you want, though not big amount. We have micro loans of various types with which we create assets for our customers. We buy vehicle, we buy generator to have access to run their businesses. Our products are many.

What is the major focus of  the Bank?
Major focus of micro finance bank in Nigeria is to reach out to the unbanked who simply deposit money into bank. There is what we call active poor, poverty alleviation or eradication is one of the main objectives of micro finance banks. You will discover that there is exclusion of people who are not very rich; those who are not able to support their demand of loan with collateral, these people are called the active poor.

There is another type of poverty we call them destitute. Destitute are those who do not have anything to do. Those ones micro finance banks do not enjoy going there.

But those who are active poor but they are only exclude by commercial banks because they don’t have the collateral. Their inclusion is the main focus of micro finance banks.

Do you think that the micro finance banks have been filling those gaps?  
They have been trying to fill the gaps, but the room is still large, people can still come in, there is still more room. The business is so wide that people are trying to specialize. Some people lend to women alone, some people they don’t even do micro loan.

Some are doing poverty alleviation, may be the highest they can lend to anybody is fifty thousand naira. Some people  specialize in grouping people together, the way of risk litigation if they don’t have collateral, but when two or three people come together you ‘marry’ them sort of, so that when one person is in default the other people will rally round them. It is solidarity arrangement.

What are the challenges facing micro finance bank operation in Nigeria?  
The regulatory authority is number one challenge, those who are regulating micro finance banks; they too are learners like us. Initially it was like a photocopy, copy and paste.

They went to other climate, especially Asia sees what they are doing, very good they brought it in. copy and paste will not work. Central bank has done a lot, they have done a lot of research, they have employed consultants who look at what is o Kay for Nigeria and for the human capital development, they are training people so that they will know how to do it. Things are getting a lot better.

The second major challenge is that there is no adequate funding; Nigeria is a very wide and very fast place. We have been talking of micro finance support fund for a very long time but up until now, there is no defining place where micro finance can go to get more support. What we are doing is not what a hundred million naira capital can do. However, with 20 million naira and above you can try your best.

Many opportunities are there but we do not have support fund. Another major problem is our people. Even though one of the practitioners said we have bad lenders, I am telling you have bad burrowers too in micro finance banks. Some people they will just come and tell you lies. How many things will you be able to verify.

The moment your money gets to their hand, you see the other side of the game and it will be very tough. Lastly, in the law enforcement system there are corruptions. Everybody knows that corruption is usual in Nigeria, but if somebody owes you money now and you take the person to police, police will either tell you it is not their duty and if they want to intervene, they will demand for money, after demanding for money they will demand for money from other side. The two of you will jam each other; there is a lot of social problem.

As the national assembly is planning to review the 1999 constitution, what are the areas you want them to look into critically in the interest of micro finance banks?
The regulators, they are trying already, they should do something fast about micro finance development fund. There are so many unimportant sectors in the economy that billions of naira is being wasted. To give money for micro finance support is now a very big issue. Two, they should make sure that government help in providing infrastructure.

Like in this office now, we have to get generator apart from the rent. Central Bank also insists that we have to get to a standard like that of a commercial bank. So, the over head cost is very high. If the overhead cost can be brought low like it happens in Bangladesh, in India and in Pakistan where they copied the system, we will go a long way.

What is the attitude of Nigerians towards micro finance banking?
There is no trust between the population and the micro finance sector, because of what happened in the past two years when the regulators were not getting it right and consequently it led to the liquidation of many micro finance banks. The side effect of that is still in the system. One thing is that there is a need for the micro finance bank and people know that that need is there.

But they do not trust the micro finance bank to release their money even for 24 hours. Some of the banks want to take your own money even for a whole year if possible. I know that we will get over it with time.

What are the effects of unlicensed money lenders on micro finance banks?
We have a lot of unlicensed money lenders. They are doing the work of micro finance but they are not licensed as micro finance bank. They have effect on the system. Nigeria is a gullible society. So many of these money lenders play on the ignorance of the general society and they will set a mushroom organization, and call themselves money lenders or Investment Company.

They will say bring your money they will give you 10 per cent monthly and people will say this is better than micro finance that will give me 2 per cent or 3 per cent, with this, people have lost their money.

The effect of this is that; before the people lost their money they have deprived micro finance banks access to those funds. Also, when the people lost their money they will then have negative perception of the real micro finance banks. It boils down to the issue of trust that we are talking about.

What are the expansion plans for bank?
The first two and half years is a period we want to know our market very well, to the large extent we have known our market. We have made our mistakes and we have learnt our lessons.

The next level is that we want to become a state bank; a state micro finance bank has a minimum capital of 100 million naira. By the special grace of God, we are now in the period of capital accumulation. We have the target to have 100 million naira. From there we will be able to create branches. We have some areas now where we are operating as a business unit just to have understanding in case we want to establish bank we know where to go to.

If you see our objective, we want to be a household name in the world of micro finance banking in Nigeria first of all and eventually in the whole world. We want the bank to outlive us. The new stage is starting in January by the grace of God.

What is your management style?
Even though some people have criticized it, I have a open door management style. Though I do not subject everything to democracy, because if we are to subject everything to democracy there will be too much error and lapses. I have had situation when I tested my management before and I discovered that if I listen and follow their opinion maybe this bank will not be where it is now.

I know where I am going and I share my vision with them. I have listed my objectives, they can have their objectives too but it must be incorporated into the corporate objective of our micro finance bank. From the cleaner to the chairman of the board I operate open door policy. We have procedures, we have head of departments, and we meet regularly. Even the least of the junior staff can bring idea to me directly.


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