The President of the National Association of Microfinance Banks, Yusuf Ahmed Gyallesu speaks to newsmen on the problem facing the microfinance sector of the economy. He proffers solutions to the problems and speaks on other issues facing the economic sector of the country. Excerpts:
May we know you officially?
I am Yusuf Ahmed Gyallesu, the National President of National Association of Microfinance Banks which is an umbrella body of all the licensed Microfinance Banks in Nigeria, that is numbering close to 900.
How has it been managing Microfinance Banks?
As you know, just as it is obtained in all other sectors of the economy, the terrain is terribly bad. The economy is in shambles and everybody is struggling to survive.
At the same time we are in business to cater for the financial and banking needs of people at the grassroots. We are continuously striving to do that.
So with the recent policy of the Central Bank of Nigeria that we have to increase our share capital, those that were able to achieve that; At least they have gotten the strength to extend their loans and credits to these targeted customers.
Like I said, the situation is bad and everyone is struggling. As we are struggling, the customers are struggling because we are the ones servicing them. If we have issues with funding it will directly affect them.
But we are doing our best and we are meeting our obligations to mop up deposits and then give out loans.
What are you doing to get the situation under control?
You see, the Nigerian economy is driven by the government. I am aware that there are so many interventions to cushion the effect of the situation on the economy.
You know and I know that all these intervention funds that are brought out by the government is the government that is directly disposing to the masses to cushion the effect of these economic situations that we are in.
For us as microfinance banks, these funds are not channeled through us. Every fund that you see microfinance banks giving to their customers are their own funds that they sourced on their own. There is nothing like government intervention in their funds.
But as an association this is where we keep advocating. We can only lobby. It is the government that wants to assist the masses. It is their fund; the masses are the ones that form the government.
So if they in their wisdom, they chose to use other avenues, it is their money. But however we are critical stakeholders in this economy. That is why we are in existence. We are the ones that know the kind of businesses these people do. And they are already our customers.
So if there is any intervention fund for them, I think the right people to use are the microfinance banks. But unfortunately this is not being done. But like I told you we are advocating. We are lobbying and we are constantly telling the public that this is what it should be. This is how it should be done. So we hope what we are advocating for is not falling on deaf ears of the government.
The Central Bank gave 30th April, 2022 as the deadline for all the banks to meet up their new minimum share capital.
As at the last count about 200 banks from data received from the Central Bank; because they are the ones to know those that were able to meet up the minimum share capital. You can see, out of close to 900 banks we are talking about only 200 banks. As I am talking to you now, CBN is collating names of those who have made it, and those who have not made it. I am waiting patiently to see what they are going to do. Will they out of the almost 900 clean out over 600 banks?
Even though we know as an association, even before the new regime of minimum capital share, some of the banks have closed shops on their own.
These are companies, and just like any other company you can have good ideas on what business you want to do. By the time you start it you will have some challenges which you cannot control. Nobody forced you to do it. So you can quietly close the shop, return the license to the Central Bank and then you are out and find another business to do.
There are about close to 200 that have done that; they own closed shops. But licenses have not been withdrawn from them. We still carry them along as our members.
But we hope, after this exercise that the Central Bank is doing now, all those that have closed shop and those that have not met the minimum share capital, will be removed.
CBN in their wisdom we believe will want to segregate this. These are the ones that on their own closed shops for a long time. So the issue of share capital will not affect them. “They are out already.”
And for those that have been existing, doing their businesses, servicing their customers but are unable to meet this new minimum share capital; the CBN will come up with a separate list, of which as an association and other places we are lobbying, we want a situation where Central Bank will look at those ones and say of give them some more time or possibly reduce the minimum share capital, so that at least you don’t close so many banks, close to 600 banks will be out of business. It will be a huge setback for this economy.
What effort are you making? As an association, when did the new policy come out?
We went twice to each of the six geo-political zones of the country, we sat down with critical stakeholders, the microfinance banks practitioners, investors in those microfinance banks and other critical stakeholders, we had workshops, and we showed them the various options of meeting up with this minimum share capital.
For instance, in my village in Kaduna State, in Zaria that is Gyallesu, if there is a bank in Kaduna, which is the capital of Kaduna State an urban area; any unit bank that is in urban area, the minimum share capital they are required is from 20m, now to 200m. So if they cannot meet that, they are advised to relocate, to leave the urban area, or to go to a rural setting where the minimum share capital required is just 20m.
So we have to go round giving them the options. And then another option is mergers and acquisitions like the example I have given you, if in my area Gyallesu in Zaria there are about five microfinance banks, and each of them on their own cannot meet minimum share capital. What I said, why don’t you meet, collapse into one; each one brings what they have, you will find out they will meet the minimum share capital and then they continue their businesses.
Another option is if they try and cannot, another option is for them to look for another investor that will buy off the business from them. You can see it has not collapsed so they have not lost money. At least they will get money from the new investor who will later reinject additional capital and continue the business.
What is the way out?
The way out is what the CBN is doing now. They are taking a census; they have drawn a line to know who has made it and who has not made it.
When the new policy came out, we came out with a position which we presented to CBN. These are the consequences of what you are trying to do.
One, there will be loss of jobs as you are aware we offer jobs to over 73,000 staff.
And don’t forget that these are banks that are servicing the local people, people at the bottom of the pyramid. They are relying on us for banking and financial services. If the banks are dead, it will directly affect these customers.
Don’t forget that out of over 800 banks that we are talking about, almost 200 of them have closed shops on their own. Those ones are put aside. The remaining ones, about 600, are also going down. Now these surviving ones, close to 200 will definitely be affected by the closure of these other 600 banks, because for an economy to lose about 600 banks is a terrible thing that will happen to the economy. There will be negative rippling effects on those that are still in the business. People will go and start withdrawing their money.
Those that think they have survived, believe you me after the closure of over these 600 banks, they will be directly affected.
And don’t forget that every microfinance bank by law must have a corresponding banking relationship with a commercial bank; Meaning a lot of commercial banks are relying on funding from us. And if we are dying, definitely our funds with them will also go. So you can see that it will affect the whole system. And the financial system of Nigeria will be in deep shit.