The Executive Vice Chairman and Chief Executive Officer of De Ambassadors Advisory and Investment Ltd, Oba Boniface Omozuapo, has revealed that most microfinance banks in Nigeria shut down because of their unprofessional approach to loans.
The De Ambassador CEO made the explanation while revealing to THE WHISTLER of Plans to launch a microfinance bank.
The company which started 22 years ago has already expanded from De Ambassador to De Ambassador Advisory and Investment and Omozuapo thinks he can double it with a microfinance bank to be launched soon.
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In August this year, the brand launched a cooperative that produces made-in-Nigeria rice, palm oil processing and the processing/packaging of organic cream.
In the hypercompetitive financial sector, the CEO believes he can enter the banking space through the promotion of grassroots investments.
The CEO told THE WHISTLER that the company has provided financial education and training to the market men and women including widows.
“Later on, we thought of migrating to something better and we said let’s open the Ambassaodres Micro Finance Bank and the Ambassador Agro-care Cooperative Society. We have started the cooperative society projects in phases. So, soon we will go officially into the micro-finance bank business,” he said in an interview.
He added, “Most people set out of business without following due process. So, the cooperative gives us the courage to bring the grassroots people to become part of the process then from the cooperative, we move to the final phase which is now the Ambassador Micro Finance Bank.”
The company has expanded to 10 states according to Omozuapo, but when launched, the microfinance bank will be competing with the 882 microfinance banks licensed by the Central Bank of Nigeria.
Between 2014 to 2020, the Nigerian Deposit Insurance Coproration liquidated 273 microfinance banks.
NDIC said 42 were liquidated in 202, 154 in 2019 and 83 in 2014.
Explaining how the bank will cope with competition, De Ambassador’s boss explained that the they have understudied the sector since 2000.
He said, “We didn’t just come, we migrated from one level to the other. We are building upon something.
“There is a connectivity between us and people that work with us. They don’t see us as tools for the money. They see us as a tool for business success. It is not just about the bank.
“I understand the issue of Nigerian and non-performing loans. But ofoftentimesthe organisations themselves are not sincere.
“Most non-performing loan is a collaboration of top officials of the country’s financial industry and the people. So, there is a lack of insincerity there. We have been giving loans even as an investment company.
“We understand that banks fail oftentimes because of the corruption in the system. Some of these bad loans are a result of poor arrangements by bank officials. If you monitor loans, you will be able to dictate if their is a red flag and you provide advisory services to them.”
According to him, most microfinance banks in Nigeria are not practicing their core mandate.
He said they behave like the big banks, adding the “whole concept of microfinance is to concentrate on micro businesses.
“If somebody is coming to a microfinance bank asking for a loan of N10m, Something is already wrong. There are microfinance banks that give that. They even give up to N20m to N50m.
“It is the implementation of the concept of microfinance banks that is the issue. The concept of microfinance is to give easy access to small funds and make it flexible for payment so that micro and small businesses can survive.
“For instance, if a young graduate is starting a business and needs N1.5m, he will also need more time to repay. So, you have to make the interest a single digit. For us, it is 4 per cent. We have tested it.
“Micro businesses are plenty and need to be reached. If we have 2 million Nigerians looking for small loans and I have N200m, if I give the money as a loan to one person, I have defeated the purpose of microfinance. But if I share the N200m to 2,000 Nigerians, they will turn over and even create more jobs.
“In Nigeria, people go to a mirofinace bank and get N50m loans because they have links with the manager or a high profile officer in the bank. But someone looking for N50,000 can’t get a loan and you ask what is microfinance meant for.”