INTERVIEW
Adolphus Arebanmhen Aletor is the managing director and chief executive officer of Rigo Microfinance Bank. He graduated with a distinction in Accountancy. He also holds an MBA (Management). He is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN). Aletor worked with Equitorial Trust Bank Limited before it was acquired by Sterling Bank Plc, where he managed one of its fastest-growing branches. Aletor is an alumnus of the New York University (NYU)’s Stern Executive Education short course in Breakthrough Strategic Thinking. He is a product of Columbia University Graduate Business School, New York, where he did a short course in Leadership Essentials. In this interview with THISDAY, he speaks about the Nigerian banking sector, the challenges of leadership in Nigeria and his desire to contest the Edo governorship election in 2024 and more. Excerpts:
What is your assessment of the Nigerian banking sector?
The banking space in Nigeria has evolved. There have been great changes in terms of growth, product offering, use of technology, and service delivery. In terms of service delivery, for instance, people in my generation will appreciate it better because we witnessed the era of ‘Tally number’ even though in some quarters of banking, things tend to be returning to the status quo as we often see the long line of customers waiting to be attended to. But there is no doubt that we have made tremendous progress in service delivery, and this is simply because the sector embraced technology. So, inspired by the challenges we have with service delivery in conventional banks, the advent of technology-driven financial institutions called fintechs has made things easier and the progress consistent and sustainable.
From the point of view of growth, the sector has been consistently standing at N65.48 trillion as of the half-year 2022. Technology has also aided this growth, helping to process more transactions more efficiently and effectively. The banking sector is the most dynamic recipient of technology in Nigeria. It has contributed immensely to the economy employing over ninety thousand staff and the top ten banks paying N260.3 billion as tax to the government for 2022.
It’s argued that CBN should consider increasing banks’ capital base to forestall any collapse, as we have seen in the United States, where three banks have since failed and in Switzerland.
The issue of increasing capital is neither here nor there. A bank that wants to fail will fail, irrespective of the size of the capital. This is my opinion. In 2023 alone, three banks have failed in the USA and one in Europe. One of the banks is bigger than the entire banking industry in Nigeria. So it is not a matter of size. Capital size is not only the thing that can kill a bank. There are several other factors. For instance, Silicon Valley Bank failed from a run from investors occasioned by poor information management. This was a single bank far bigger than all of Nigeria’s banks. At an exchange rate of N460 to $1.00, Nigeria’s total asset of the entire banking industry as of October 2022 is $151 billion (about 72 per cent of SVB), while the deposit is $93 billion (about 53 per cent of SVB). So it is not correct to adduce capital only to failure. However, it is good for a bank to have a healthy capital base. I feel that while the CBN may set the minimum threshold, increasing it should be at the discretion of the shareholders. That is not to say that banks should not increase capital. The availability of sufficient capital contributes to the size of a bank and also signals what size of funding or transaction a bank can do, which will effectively reflect in its bottom line.
Do you think microfinance banks effectively play the intermediation role they were set up to play?
Everyone has been trying to answer this question for many years since the introduction of community banks and their eventual transition to microfinance banks. The regulators and the investors share different opinions here. Don’t forget the essence of introducing microfinance banks. It was to meet what you call the double bottom concept of making a social impact and sustainability. It was meant to meet the social and financial needs of the citizens at the bottom of the pyramid, or what you call the grassroots on a profitable basis, to guarantee sustainability. Again assessing it in terms of growth, product offering, use of technology, and service delivery, I would give it a pass mark.
I am doing this not just because I am a player but based on these empirical details. However, though the regulator oversees its operations, they pay lip service to its existence. I have gradually seen the exclusion of microfinance banks from key decisions taken by the regulators in the economy. First was the deployment of the target finance to consumers during Covid-19 and, most recently, during the naira redesign policy. The industry is most often excluded and only involved as an appendage afterthought. Current statistics from the sector show total assets of N1.4 trillion and total loans of N1.04 trillion. Though they may have pockets of small balance sheet size at this stage, their contribution to the economy should not be undermined.
We see microfinance banks trying to dominate the digital financial services space, and they were able to display their efficiency during the cash crunch experience a few months ago. What do you think is the driving force?
I would quickly respond that it is sheer grit. When you have a father that does not believe in what you do, you work extra hard not only to impress him but to make a success out of your unpopular venture. The industry has been undermined by the government, and stakeholders are working on overdrive to make a success of it. The use of technology in that sector is revolutionary and disruptive. In order not to lose market share, commercial banks have entered that space to compete, and because of their size, they comfortably outperform small players. The industry was able to hold up during the cash crunch simply because they are still fighting for relevance and recognition. The application of technology in that space has changed the conventional narrative.
What can be done to strengthen microfinance banking in Nigeria?
As a player, we face different challenges in trying to meet the objectives of our existence. One, there is a lack of understanding or appreciation of our existence by the government. They tend to use the same mentality to measure our relevance and that of the commercial banks. The commercial bank with the least total asset may be higher than the entire microfinance sector but that does not mean that the sector is irrelevant to the economy. Think of the number of employees, Financial inclusion, the proximity of financial services, etc. For some people in some locations, the only financial service provider they know is a microfinance bank. Two, government programs for the grassroots should be inclusive. Some of these programs if run through the sector, will not only guarantee reach, but it will also ensure the sustainability of the sector. Three, the sector players should be involved in the policy formulation that has to do with the sector. You cannot shave a man’s hard in his absence. Four, using the same orientation of size and relevance to assessing the sector will further hurt it. Microfinance is different from commercial banking.
They require different orientations both in operation and regulation. All the issues I have mentioned are exogenous, but there are internal responsibilities that sectoral players should adopt too. For instance, digitalisation of operations should be embraced at all levels, even though most of the players located in certain places complain of adequate infrastructure to promote and sustain digitalisation. The non-availability of constant power and Internet facility is a bane. Capacity building is another critical factor that should be embraced by players, as this has a direct impact on service delivery, compliance, corporate governance, and the utmost sustainability of the sector.
Product differentiation and offering is also a factor for survival. The sectoral players should develop tailor-made products based on their target market and location. Though I have mentioned corporate governance, the issue of governance is key. Boards of industry players should be knowledgeable, diverse in their background, and should be genuinely interested in the affairs of the microfinance entity. There should be no shortcut to compliance. This should be at the desk of the chief executive and, to some extent, the board. I believe there is still a large room for the sector as the current sector to GDP is very wide.
Tell us about Rigo Microfinance Bank.
Rigo microfinance bank limited was incorporated in 2017 and commenced operations in May 2018, so we are officially five years this month of May 2023. We started with a capital base of N20 million and have since secured CBN approval for N249 million recapitalisation. Our total assets, employee size, and revenue have steadily grown over the years. We have disbursed loans over N3.5 billion since inception, with women constituting about 78 per cent. The current customer base is about 13,800. While we commenced operations as a manual bank, the effect of Covid-19 made us commence a digital transformation journey that is about 95 per cent complete.
So we can say that we are a digital bank providing financial services to our customers through the use of mobile applications and Internet banking. Our digital platform enables account opening, transfer of funds in and out of the bank, make investments in fixed deposits, embark on a savings plan, buy airtime, and pay bills. Our staff is also able to carry out transactions in the field through our Mobile Tellering devices and reduce turnaround time. We offer POS services to merchants to aid their collections and deepen our agency banking.
How has the bank supported micro and small businesses with loans?
Rigo microfinance bank limited has been very supportive in his regard. Currently, we have disbursed about N3.5 billion to our customers. Eighty-seven per cent are micro accounts, and 13 per cent are SME accounts. A further sectoral breakdown shows about 70 per cent to trade and commerce.
What are your products, and how have they supported in ensuring poverty alleviation and financial inclusion?
Rigo has developed products along with savings and loans. We have savings for individuals, the education sector, etc., such as Ajo, Jolli, Save and Borrow. Loan products cut across sectors, and they include Buy Now Pay Later, Rigo Buy Now Now, NAWE etc. These products are targeted at the grassroots and, over the last five years, have empowered our customers. We have a BVN machine in the bank that helps in capturing new customers to aid financial inclusion.
Nigeria recently had a general election, and the elected will assume office by May 29. What is your take on leadership in Nigeria?
Leadership in Nigeria is wholesale, cash, and carry and leaves no prisoners. Our leader takes all and is disconnected from the people they lead. There is a sense of entitlement and impunity in leadership, and this is the problem we have. In banking, we are taught to develop products with the user in mind, but in today’s politics, products and policies are developed with the leader’s and politician’s convenience in mind. Until these changes, there will continue to be a leadership gap.
How will you rate President Muhammadu’s Buhari administration?
I will rate it just as all the indices have shown. The inflation rate at 22.04 per cent, the exchange rate at between N460 – N500 per dollar but about N760 per dollar in the black market, the unemployment rate at 40 per cent, fuel is scarce, and where available, it is expensive, etc. People have continued to complain, and a few look to the exchange of baton with a note of apprehension and uncertainty. Though the government has given its reasons for the poor performance claiming that it is not the job of the government to create jobs, and the effect of global uncertainties, etc., I look forward to a better future for our great country.
How can the leadership deficit be addressed in Nigeria?
This is very simple. The government should create a level playing ground for people to approach political governance. Make participation attractive. Guarantee the safety of lives and property before, during and after elections. Guarantee fairness, free and credible elections, and open the door of political governance for participation. De-emphasis on cash and carry politics. This way, true leaders will emerge.
We have seen technocrats like Godwin Obaseki, Alex Otti, and Peter Mbah go into politics. Do you have similar plans too?
You mentioned great names and brands in their field of choice. Though we have not received 100 per cent in terms of performance, their incursion into politics is a step in the right direction. What I am sure of is that they will do things differently. Someone has to break the ice and pay the price, and that’s what they have done. Sure, I have considered going into politics. Having studied the system, I see where the gaps are clearly and would want to contribute my quota to fixing the friction rather than play docile.
You are from Edo; what is your assessment of governance in the state?
Edo state is blessed with both human and natural resources. The desire to change the status quo brought in the present administration with the full support of the Edo people. Our politics is above average, and we know what we want. We vote intelligently. Unfortunately, the people have not been able to reap the dividend of their efforts, and there is still a huge gap in their expectations. The people have shown a lot of disappointment and are yearning for a new beginning. I understand that the present administration has had its challenges and has allowed itself to be distracted, but like I said earlier, it may not be 100 per cent. Someone has to pay the price. While I commend the administration in some areas, there are some critical areas where the people expected them to make an impact.
So, are you considering contesting the 2024 Edo gubernatorial election?
My gloves are on, waiting for the umpire to blow the whistle. I embarked on wide consultation on the decision and to check the pulse of my constituency. The overwhelming response I received shows that there is a huge leadership gap, and the people’s expectations are unanimous. They are not asking for too much. They just want the basic things of life. I intend to address those issues frontally when I become the governor of Edo state come 2024 by the grace of God.
