Abiodun: The Future of Consumer Finance is Bright

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The Chief Executive Officer, Motion Yield Limited, Mr. Oyelaja Abiodun, in this interview spoke about the potential of consumer finance in Nigeria and plans by his firm to expand its operations in Nigeria. Obinna Chima presents the excerpts:

What is your firm into?
What we try to do is to ensure that we look at situations and proffer solutions. We are a consumer finance firm. At the moment, we give loans without collateral and we disburse to customers’ accounts within 24 hours. A customer does not need to have an account with us before we give him or her the loan. We know that in the normal banking sector, you must open an account and provide collateral, but we are saying no to all those things. We focus on the employee, which are salary earners. What we do is that we collect post-dated cheques and for those with savings accounts, we do a direct debit mandate on their accounts.

Now, looking into the future, we know there are vast opportunities for us in this country. What we are doing is a segment of retail banking, which is consumer finance. We realised that there are lots of opportunities that we need to tap and that is why we are saying we need some people as investors to look into us and see what we are doing, so that we can move together and then expand. At the moment we are in three states- Lagos, Ogun as well as Oyo. We only started operations in 2015 and despite the recession the economy just came out of, we have been able to weather the storms by bringing out good results.

Going forward, what we are trying to do by next year is to expand our number of branches or our presence to about 13 other states. So, we are looking at having presence in 16 states, including the Federal Capital Territory by next year. To do that, we would need to get some additional investors. As I earlier said, it is a business that is taking a different dimension from what is being practised. Truly the banks are trying to learn from us. So, our long-term goal is that by 2020, we would become a regional bank, with strong bias for retail banking. We would want to consolidate into a regional bank and then bring in other aspects of retail banking into our operations.

At Motion Yield Limited, we believe in technology and we have adopted technology. We don’t believe in having a gigantic building. That is why if you come to our head office, you will realise it is a small office. That is because what the people are supposed to do have been pushed to the system. We are not a bank because we do not take deposits. We are not regulated by the Central Bank, but we have a lenders’ permit which we obtained from the court. The loan is to assist those that need to rent a new apartment or they need to renew their rent, or maybe they need money to travel out. So, what we are doing is tailored towards the individual. The amount of loan we do is not above N1 million and we ensure that we get the credit history of the customer.

Why is it that the consumer finance sub-sector appears to be growing rapidly with increasing competition among operators?

I can tell the story of the sector because we actually started it. Before we came into the picture, the only organised firm was giving loans to only those in the public sector. But when we came in, we changed the landscape and from then, we started learning. This business requires understanding. Some of the operators do not understand the business and that is why we have seen a lot of them close shop because of high NPLs. But as to the future of this business, it is very bright. Consumer finance is the future of banking in Nigeria. It is the future of financial services in this country. Why did I say so? What we are doing here is what is called credit scoring in the developed world.

What we are looking at is a situation whereby even in the comfort of your home, you can just log into the website, make a loan request and you will see the money in your account. So, the future is very bright for those that understand the business. But for those that don’t understand the business, they would not survive. So, at the end of the day, those of us that understand the business would take the business away from the banks. The banks would now be concerned with commercial banking. At Motion Yield, we set the pace, because we started the issue of direct debit mandate. What others were doing before was cheques, but we introduced the direct debit mandate in the sector.

How do the new legislations on Movable Assets and Credit Registry support your business?
The Credit Reporting law that was passed is actually in our favour. We have been using the credit bureau before the law was passed. At the moment we have three credit bureaus in Nigeria and all of them are on our platform. In this business, we need to understand our customers and their credit worthiness and that is why we are very happy with the government passing the law because it is going to deepen credit to individuals. Now, for the collateral registry, that one is new and it is actually for the commercial banks, microfinance banks and other organisations that take collaterals. For us, we don’t take collateral and so that one does not concern us. But our vision is that by 2020, we would become a regional bank, so what we are doing is that we are studying that law so as to know how to use it to our advantage. We do things differently and we call it disruptive banking. We don’t want to follow what others are doing. We want to do something different so as to achieve different results.

Do you consider the fact that jobs are unstable in giving out loans to employees, also, is the rising number of number performing loans in the industry not a concern to you?

Like I said earlier, we started in 2015. When we started this organisation in 2015, the economy was already going down. But we saw an opportunity. Banking is to us an adventure. We know that jobs are unstable, but we don’t take the extreme position that everybody would lose their jobs. That is not possible. Secondly, we believe the economy would recover. Therefore, if somebody loses his job today, we know that in few months’ time, that person would get another job. So, we don’t consider that as a set back to us. Also, even losing a job is not an issue to us because what we do is that every loan that we give out is insured. So, it means that if there is a job loss, we approach our insurer, who pays us. Now, on the growing non-performing loans (NPLs), I was in the banking industry for more than a decade before I left. I usually say most of the NPLs in banks are not supposed to materialise.

Before a loan goes bad, you would have known. At the point your risk officers are reviewing the loan request, they ought to know that the loan is not okay and in a situation the bank knows that the loan is not okay and goes ahead to grant the request, you know that the loan would definitely go bad. So, that is what we guard against. Our assessment procedure is very strict and thorough. So, once at that point, we know that the loan is not good, we decline it. But if it is a good loan, we go ahead. So, it is not that we don’t have NPLs, but because we know our customers, we are able to manage the situation. Another thing we do is that we monitor the economy and each of the sectors that we give money to.