More MFBs may sink as DMBs intensify foray into grassroots

THERE ARE STRONG INDICA TIONS that scores of micro finance banks (MFBs) may wind up their operations soon as the banking system operational and regulatory dynamics now defining the microfinancing market trend appear too complex for many of them to cope with, businessa.m investigations have revealed.

An on-the-field assessment of the sub-sector’s market by our correspondent over the past weeks across major cities in the country showed that apart from the MFBs’ inability to invest in critical deposit-attracting and service-enhancing technologies and solutions, the banks were also losing out in innovative product development and marketing strategies’ fronts.

This ugly scenario is further worsened by the bigger deposit money banks’ (DMBs’) intensified foray into the traditional strongholds of the MFBs to boost lending and attract deposits through promotional marketing and deployment of world class mobile banking, Point of Sale (PoS), agency banking channels.

Business.am investigations on the customer traffic in some MFBs in the Federal Capital Territory (FCT), Benin, Gombe and Lagos showed that except for a few of them still enjoying governments’ patronage, most of the banks were not doing well, with some of the visited branches recording less than 20 customers per hour.

For instance, in Lagos, two MFB branches located in Abuje-Egba and Ogun State toll gate end of the Lagos-Abeokuta expressway visited on Wednesday were observed to have recorded less than 20 customers’ visits/transactions as at about 11 a.m.

Similar investigations carried out in Jabi axis of the FCT, where some MFBs have their branches on Thursday painted a similar picture, with one of the branches attending to less than 10 customers in about 45 minutes of our monitoring.

A woman customer, who simply identified herself as Rebecca, told businessa.m on her way out of the bank that “I just come in to withdraw my last money there because I now have some people that use PoS near my house that I can do business with.

“I am a small trader and since I started with this bank, they have not been able to give me loan because I cannot pay the interest which is even higher than those being charged by commercial banks”, she lamented.

In Gombe State, our investigations showed that some of the MFBs are doing fairly well because, as one motorcyclist explained: “The state government is supporting the microfinance banks just as Kano State Government is doing. So they survive. But for those that are not owned by government, I understand some are not even paying salaries for six months.”

Similar investigations in Benin, Edo State capital, reflected that one of the biggest MFBs in the country with its head office in the city is controlling over 70 percent of the micro-financing business market share, with many others ‘idling’ as the day goes on.

A woman trader interviewed, confirmed in pidgin English that those small banks “are not popular because dey no dey give loan to people at all. The only one we know is the one you mentioned i’n name.”

Commenting on the precarious state of most of the MFBs in terms of capital base inadequacy, dwindling share in the market as well as incapacitation to deploy technologydriven real time services, a chartered banker and industry expert, Dr. Uju Ogubunka, told our correspondent that the days of many of the MFBs are over “because many of them have failed to define their business or change the ways of doing business in the face of emerging developments in the industry.”

Ogubunka, a former registrar of the Chartered Institute of Bankers of Nigeria (CIBN) and currently the National Coordinator of Bank Customers Association of Nigeria (BCAN), explained that outlook for the sub-sector looked gloomy “un- less they restrict themselves to their mandate rather than copying the DMBs as the CBN is adopting new strategies to deepen financial inclu- sion and promote cashless banking in the country.”

Another industry player and for- mer National President of National Association of Microfinance Banks in Nigeria (NAMB), Chief Jethro Akum, who linked some of the challenges facing most MFBs to over-regulation by the CBN, said that there was the need for the monetary authorities to review the capitalization require- ments and based it purely on each player’s size.

Citing the regulatory regimes in countries like Kenya, Ghana and Ethiopia to support his position, the industry player however agreed that the future looks bleak for many existing MFBs “unless they synergise efforts in the acquisition of appropri- ate technologies and solutions in re- sponse to the growing penetration of the bigger banks into the grassroots to take over the market.”