‘Microfinance Banks Drive Financial Inclusion Best’

Technology-savvy Rogers Nwoke is the founder and CEO of HASAL Microfinance Bank. HASAL MfB, with capitalisation in excess of N2 billion, is currently rebranding. He tells Stanley Nkwazema that microfinance banks are the best institutions for driving financial inclusion

How it all started
T he story of HASAL Microfinance Bank dates back to 2003, during the era of community banks. My area of training in the banking sector was with MSMEs; what you call SMEs banking in the commercial banks then. With this experience, I realised that access to finance was an important instrument for supporting the growth of small businesses. In 2004, I made my first attempt at starting a community bank and so RILGWARI Community Bank was incorporated. The order then was that wherever you are setting up shop, the name has to be associated with the community. And because I was opening in Abuja, then land of the Gwaris, my consultant suggested the RILGWARI name. The promoting company was my family business – Rejoice Investment Limited.
Interestingly, in the course of getting regulatory approvals, Nigeria started talking about launching the Microfinance Banks policy. When I saw the opportunities therein of going into micro finance, the idea was dropped till the Microfinance Banks policy was launched in 2005. In 2008, we applied for a Microfinance Bank license through the CBN and got licensed and started business in October 2008. Before then, I had taken a year off-work to do a Master’s in Business Administration at the University of Warwick with my research interest centring on finding an appropriate microfinance model for Nigeria. HASAL Microfinance Bank commenced operation on October 2008. So by October 2018, we would have fully completed 10 years of very unique Microfinance services in the FCT

The challenges
Yes multiple taxation and levies from government, especially the local governments have been a big challenge. The truth is that you don’t know when and how these levies and taxes are manufactured. You just wake up and somebody tells you that you have to pay tax for using a generator. The same government that you pay your taxes to who should guarantee you uninterrupted power supply, fails and in order to succeed in your business you go the extra length to invest in a fixed capital called generator. The same government that fails to give you power, comes back to levy you for emitting gaseous substance.
You have another one called fumigation and pest control. You have to pay a levy for putting a signage after paying for Business Permit. There are all manner of things that you can’t continue naming. Now the question is if I have gone to the Corporate Affairs Commission and registered my business and given a certificate to do business in Nigeria, why am I paying for a business permit again to a local government?
Then after paying the LGA for a business permit, I now pay to put on a signage. I pay the local government to have a television in my office. These taxes are uncountable and they differ from one local government to the other. It’s a big challenge and I honestly think that government has to do something urgently to streamline those issues.

The big issue of public confidence
Of course, you have the big issue of public confidence in the microfinance sector. It is a sub sector that has been very badly wounded because of fake entrants and all manner of human beings committing atrocities in the name of microfinance banks. And because the public out there do not seem to know the difference between a licensed microfinance bank that is being regulated by the Central Bank of Nigeria, the NDIC and several other regulatory bodies, everybody who is out there calls itself microfinance bank, collects money from people, disappear into thin air and people say its microfinance bank.

When they hear the rate at which microfinance banks are folding and when you try to find out who are the ones folding, you will realise that they are not the real microfinance banks. Yes, agreed that some microfinance banks have closed shop but we must find out why what they are passing through.

Why I invested in HASAL
What I keep telling people is that a microfinance bank is micro in the sense of the size of the capacity of transactions it does with its customers. In micro, it does not mean a microfinance bank has to be small. A bank is a bank and since Nigeria has chosen to do the banking model of micro finance business, Nigeria has to come out and make microfinance bank banks. When you are a bank, you do what a bank does.

What distinguishes you from a commercial bank or what the CBN named deposit money banks is that you are limited to the size of transactions you can do. But if you are a bank, you should do everything that a bank is doing – savings, loans. Customers at the SME level would need small forex like $5000 to $10,000. So, microfinance banks should be able to trade in foreign exchange. The challenge is that commercial banks can trade in bonds, treasury bills, foreign exchange and several other instruments.

Access to credit has reduced because commercial banks have stopped lending money to the sectors that need money even more. The only thing we can do to survive is lend money primarily. All other services become add-ons. It is not so in commercial banks because other services are primary and so they can survive, make money without lending money to the MSME sector that truly needs it. I think something has to change about the model to strengthen microfinance banks because we are better positioned. I do not see any other institutional arrangement that drives financial inclusion better than the microfinance banks.

Success, a moving target
Success is a journey that never ends and saying that you are satisfied means you have arrived. From that perspective, I will say no, I am not satisfied because the poor masses of this country have not been fully reached. I am not satisfied because financial inclusion is still very low. I am not satisfied because the funding gap to reach the SME sector still runs into trillions of naira. I cannot be satisfied because the problems have not been solved. Yes, we have come a long way and in ten years, we have a beautiful story to tell. But I am not satisfied because there is still a lot of work to be done. Am I ready to do this work? Yes, as I exit as Managing Director of HASAL after ten years, I will still be very committed and relevant to the SME sector and ensure that access to finance is guaranteed to the microfinance banks.