“By virtue of the business that we are doing , you have to continue to increase your capital base,” says Elijah Adegbami, the Managing Director of Mainstreet Microfinance Bank. In this interview, he explain that it is not only the capital that the Central Bank of Nigeria (CBN) is introducing. “Even the regulatory guideline is changing completely”, he added.
Mainstreet Microfinance Bank over the last 12months, we have done quite a few things that you can look back and be grateful to God and you can conclude that we have made a lot of progress in the last 12 months. Within the last 12 months, we successfully deployed our mobile banking application which is now up and running, We started the process sometimes back but within the last 12 months we have deployed it and it is working.
Secondly, we have also launched our internet banking application, which is also up and running. Also within the last 12 months our card business is also not excluded, our customers can now use ATM like customers of any commercial bank. in relation to this we have also trained our staff to be able to respond positively to this new level of business, you have to train staff on how to do these things like responding to customers appropriately and how to also make sure that the assets of the bank is protected because by the time you have exposure in the internet and mobile banking such exposure comes with its own risk.
So we have had to train our people on how to make sure that the bank’s assets are not unduly exposed. That is part of the achievements. And beside that, we have actually been able to grow our assets over the last 12 months. As at the last count, at the end of January 2020, if you look back compared to January 2019 our total assets has grown by 91 per cent and that is not a small feat. That is the total asset and total balance sheet of the bank.
In relation to this is the fact that our risk asset which is the loan has also grown by 72 per cent which is not a small growth. If you understand what happens in the industry, these are some of the few things we have done, and beyond that, the brand of the bank has been improved on a lot. If you go online our outlook has changed, and even if you walk into the banking environment you will discover that we have changed a lot of thing. The idea is that we want to do everything to make sure that our customers are comfortable and they enjoy our services and also to be sure that our staff are proud to work in the bank.
If you look at our head office you will see the outlook outside has improved a lot. We have been able to accomplish all these in the last 12 months and I can categorically say that in terms of funding, we have been able to secure a lot of funding into the business. The kind of funds that we have expected for more than 24 to 34 months that we couldn’t get, within the last 12 months we have been able to get that and all these things has affected the kind of response that we are getting from both the customers, the staff and even the investors, because we have investors; people that the role they play is to put funds in our business, so it’s been a lot that we have achieved.
We had our 10 years anniversary last year, it was a whole week activity and it was very successful, we had a customer forum, and we hosted our partners all over the country, we also hosted a number of our major competitors and it was a successful activity and during that time, we also did a lot of corporate social responsibility, like the visits and donations to the less privileged homes like the School for the Deaf and Dumb and we also did health walk and campaign, these are also part of the achievements in the last 12 months.
We also organised a football competition with some of our competitors and it was very interesting. Our staff were happy, the people that participated and everyone was happy, I can confidently say that over the last 12 months, we have actually achieved a lot.
When the issue of the new capitalisation by the CBN came up, first of all, it’s not anything unusual because it’s what should be expected. If you remember the time the CBN set the capital benchmark before, dollar to naira, and naira to dollar was exchanging at about N150 to a dollar, now a naira against dollar is about N360, so that’s a major jump, and that is an indication of the value of the Naira; it also has a component that reflects the level of inflation. If you started a unit micro-finance bank with N20 million then, and you are still running with that twenty million you will discover that it’s going to become very difficult for you to be able to cover your cost. So the issue of the new capital requirement as much as it is painful, it is demanding, but it is what we should expect from time to time.
For us as an organisation, before the new capital requirement came, we were far ahead of the capital that was required for the type of licence we were holding. And all along until the new pronouncement by the CBN we only needed N100million to hold the licence that we were holding and then we were operating with more than N1billion, so we were above the threshold all along and that has really helped us. In addition for us and for all our peers and colleagues it is necessary every operator recognises the fact that there is a different between regulatory capital and business capital, or what you call operational capital. So even if the CBN does not say you should bring new capital, a lot of us were supposed to know that by virtue of the business that we are doing you have to continue to increase your capital base. The truth is that it’s not only the capital that CBN is introducing even the regulatory guideline is changing completely, there is what you call prudential guideline, the guidelines we have been using since 2005, which I think was reviewed in 2011 is changing, so they have given us exposure draft to the new guideline sometime in 2019 and some of us have made our contribution but what you can see, is that the requirement of the new guideline they are actually more stringent and as a person because I was part of the committee that reviewed the new guideline at the national association level, and we made our contribution on behalf of the national association. What I can establish is that those requirements, you cannot continue to meet them by playing small. You just have to do big business, if you do business of N20million, business of N50million, in most cases you will not be able to stay in business for more than three years because the expenses alone will erode whatever you have.
For example, provisionary requirement has changed, so any little classification of your loan begin to hit your profitability very hard, not only that, the kind of pro-visionary and the regulation you have now, the quality of staff you need to run a system that will take care of that, the quality has increased. So you cannot keep people who are not trained who are not developing themselves and say you are running a business, if you do that you will be out of business very soon.
For you to meet those requirements, it will be very difficult if you are a small player, because your earning capacity must increase, your capacity to raise funds must increase, your capacity to manage the resources must also increase, so that is what we can establish and for us as an organisation, these are things that by virtue of the caliber of people we have on our board, the caliber of people we have on the management team; we have known these things ahead of time.
Like when the CBN introduced the code of corporate governance, which requires how the board should be, how the board committee should operate and so on, we discovered that by the time we brought the code and we analysed it more than 75% of all the new requirement that CBN brought are the things we have been doing before.
Because we were a part of a commercial bank before and there was like a passage of some of the requirements of the commercial banks that were passed down to us because all our directors are from the commercial banks, so that certainly gave us an edge and even when left the commercial bank, the caliber of directors we brought and the experience they brought on board puts us ahead long before the CBN introduced the code of corporate governance.
We have also had to train our directors, we sent them on international trainings on board and corporate governance, so all these things have been known to us and we are happy that we are doing them when the CBN came up with it. These are the things that has helped us to stay afloat and we believe that even with the new capital requirement, we will still do very well and we have also make up our mind, we will not wait for the CBN to ask us to look for fund before we continue to look for funds.
Well, I must say that I am very happy because rating is an indication of the confidence of the market and of the stakeholders in our business. This is the second time we are being rated, and each time we have been rated, we have what is called investment grade that is to say that people could have confidence to invest either in our shares or in giving us money as debts or even in placing deposits with us. It’s an assurance of the confidence of the stakeholders and people that have the knowledge of how a typical micro-finance that is forward looking with a good outlook should be. So it’s about the confidence.
Now if you look at the rating, after giving you the rating which what we have here is triple B- the rating agency will also put what is the outlook of the organisation, and the outlook they gave us is stable, and you know this is a time when most businesses are not stable not only because of the regulatory requirement or capital requirement but just because even the environment and the economy where we are operating on is not stable, so things changes very fast. We have been able to get to this level which is an indication of the fact that the people we have, the staff, the management and the board they are people that have earned the confidence of the industry and our commitment is that we can always do better because there is a commitment on our part to make sure that we can only do better.
From what we have said so far, you can see that the investing public, and by investment we are not only talking of shareholders, we are also talking about people that give us debt funds. we are also talking of those that places deposits with us and one thing we have achieved as a micro-finance institution is that the kind of money that people could not place with a number of our peers, these are people who have been there before us, people have the confidence to place that money with us. So the level of the confidence is high, and part of what has caused that is the fact that all the people we have both in the board and management are people of integrity and they are also people of knowledge that have demonstrated the knowledge in every opportunity possible. And we also invest in our staff so that they can hold their head high anywhere they go and anywhere they represent the bank, and I can tell you that the public has a very strong confidence in us which we are really grateful about and the confidence is not only local, because even at the international level, people talk about our reputation very well and you can see we have been able to grow our asset size from about N2.4billion in January 2019 to N4.6billion in January 2020.