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Consolidation to Reduce Microfinance Banks in Nigeria by 44%—Agusto

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Microfinance Banks

By Modupe Gbadeyanka

There are strong indications that the number of microfinance banks in Nigeria will reduce by 44.4 per cent by the time the recapitalisation exercise of the sector by the Central Bank of Nigeria (CBN) is concluded in April 2022.

This information was contained in a report on the Microfinance Industry in Nigeria released by a foremost research and credit rating agency in the country, Agusto & Co.

A summary of the report made available to Business Post revealed that the over 900 microfinance banks operating in the country may be pruned to around 500 through consolidation activities as well as failures to meet the new requirements.

The apex regulatory agency in the nation’s bank sector, the CBN, is embarking on a two-phased increase in the minimum capital requirements for all categories of microfinance banks to take effect in April 2021 and April 2022.

As a result of this, the number of operators is expected to reduce and Agusto expects the microfinance industry to fare better in 2021 supported by the global roll-out of COVID-19 vaccines, accelerated digital transformation of microfinance banks and businesses in general, a renewed focus on essential sectors and government support for MSME businesses.

“The industry, however, continues to have a high level of susceptibility to macroeconomic challenges as was witnessed in 2020,” the agency said in its outlook for the year.

In the report, the credit rating agency paid attention to the impact of the COVID-19 pandemic on the sector and non-performing loans (NPLs), an assessment of the new capitalisation requirements for microfinance banks, analysis of the financial performance of microfinance banks and a detailed assessment of the major impediments to growth in the industry.

The pandemic and the technology gaps

Many microfinance banks in Nigeria, like in most developing countries with relatively low penetration of e-channels, witnessed a doubling of obligations that were past due for up to 30 days (PAR 30) during the first wave of the pandemic and lockdown restrictions in early 2020.

Despite up to N5 billion spent by the major national and state microfinance banks in Nigeria on the implementation of internet, mobile and USSD banking services, the industry remains heavily reliant on brick-and-mortar branches for the acquisition of customers and disbursement of loans and the collection of notes and coins for repayment. Given the low technological literacy in the country, collections from Micro, Small and Medium-Scale Enterprises (MSMEs) ground to a halt during the six-week lockdown, even in sectors categorised as essential and in regions not otherwise facing restrictions.

The economic environment also did not lend itself to loan disbursements given the sharp decline in business activities while many microfinance banks were caught off guard by the pandemic with few having the infrastructure in place to lend to MSMEs digitally, the report stated.

Microfinance banks rising NPLs

Agusto said the doubling of non-performing loans witnessed by the Nigerian microfinance industry in 2020 was exceptional in the light of the pandemic, thus many operators had to provide some forbearance and also restructure loans for clients with difficulty repaying as restrictions were gradually lifted.

One of the primary strategies adopted by operators in the sector to drive recoveries in 2020 was to promise customers who met all outstanding obligations access to new loans.

Subsequent to the six-week lockdown, many microfinance banks shifted focus to providers of essential goods and services and also existing customers to drive disbursements. The growth in the industry’s loan book was, however, depressed with the portfolio remaining flat as operators adopted a more cautious approach given the heightened credit risk of MSMEs in key sectors such as education, supply of non-essential goods and services, transportation and hospitality.

Agusto expects to see improvements in the microfinance industry in 2021 as the global and domestic economies rebound and operators adjust to the new realities with a 5 per cent growth in the loan book and a 400-basis point drop in the non-performing loan ratio from an average of 12.6 per cent for major operators.

The pandemic has raised the stakes for payment infrastructure

Microfinance banks in Nigeria have been given a loud wake-up call by the COVID-19 pandemic to accelerate investment in digital channels for loan disbursement and collection.

Many operators have since developed web portals for loan applications and are actively exploring the use of payment services such as Remita, Paystack and ultimately mobile money for collections.

The efficacy of such channels in Nigeria may, however, be limited by the low digital literacy of the unbanked, underbanked and low-income target market of the Microfinance Industry. Having a strong physical presence in various geographical locations remains the major driver of success in the microfinance industry in Nigeria.

The largest microfinance banks have branches spread across the country and are easily identifiable to the target market of low-income earners and MSMEs operating in the surrounding area.

Agusto said it believes the future success of digital channels in the microfinance space (critically for collections and consequently disbursements) will be strongly dependent on the adoption of digital payments by low-income earners and MSMEs in everyday purchase and sales transactions. On the contrary, if the underlying economic activities continue to be executed in notes and coins, then the fundamental challenge of converting collections to a digital transaction would remain.

Notwithstanding, the licensing of three payment service banks (PSB) – Hope PSB Limited, 9 PSB Limited and Moneymaster PSB Limited – may offer a possible solution in the mould of Safaricom’s popular M-Pesa platform in Kenya.

Users of the M-Pesa platform in Kenya and other East African countries are able to pay digitally from and to a mobile telephone number for groceries at a market stall, for public transport or for the services of an artisan, for example. This “mobile money” can be used to settle loan obligations using the same platform, thus facilitating digital collections.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

Banking

Visa Sponsors Ecobank Cardholder’s Trip to Qatar for World Cup

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Ecobank cardholder

By Modupe Gbadeyanka

A customer of Ecobank Nigeria, Mr Ejike Michael Eziuche, will have the opportunity to travel to Qatar for the ongoing FIFA World Cup taking place in the country for free.

This was made possible by just being a customer of the financial institution in Nigeria and being issued a Visa card by the bank.

The Ecobank cardholder was among the winners of the payments firm’s Spend & Win Campaign, designed to reward customers and football lovers who were active users of their Visa cards.

The only condition to be part of the promo was spending a minimum of N50,000 in at least five transactions to qualify. The winners will have the opportunity of a first-class experience in the tournament, all expenses covered as Visa is the Official Payments Sponsor of the tournament.

“Mr Eziuche’s emergence as a winner is a reflection of the hassle-free payment experience our customers enjoy with their Ecobank Visa cards.

“At Ecobank, we are always innovating our services to suit our customers’ lifestyles, especially when it comes to how they can effortlessly access our products. I am truly delighted for him and wish him a memorable time in Qatar,” the Head of Consumer Banking at Ecobank Nigeria, Mrs Korede Demola-Adeniyi, commented.

“We understand our role as a leading payments provider, pioneering seamless payments experiences across Africa; this is why we partner with critical stakeholders like Visa to ensure that our customers can have cards that allow them to enjoy financial services from anywhere in the world.

“Our promise to our customers has always been the same; to provide them with access to affordable and reliable financial services.

“We will continue to do so through our digital platforms, including Ecobank Mobile App and USSD *326#, Ecobank Online, Ecobank OmniPlus, Ecobank Omnilite, EcobankPay, Ecobank RapidTransfer, ATMs, POSs and an extensive distribution network of over 250 branches and over 50,000 agency banking locations,” she added.

Ecobank Nigeria is a subsidiary of the Ecobank Group, the leading pan-African banking group with operations in 33 African countries and an international presence in four locations (London, Paris, Beijing, and Dubai).

The lender is a major player in the distribution of financial services in Nigeria, leveraging digital platforms, including Ecobank Mobile App and USSD *326#, Ecobank Online, Ecobank OmniPlus, Ecobank Omnilite, EcobankPay, Ecobank RapidTransfer, ATMs, POSs and an extensive distribution network of over 250 branches and over 60,000 agency banking locations.

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Banking

Sterling Bank Sponsors Training of 1,000 Youths at NJFP

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Sterling Bank

By Modupe Gbadeyanka

Sterling Bank Plc has sponsored the training of 1,000 fellows at the Nigeria Jubilee Fellows Programme (NJFP), a youth empowerment initiative between the Nigerian government and the United Nations Development Programme (UNDP).

The programme, launched in 2021, was borne out of rising unemployment and the COVID-19 pandemic, which adversely impacted the ability of young Nigerians to find work.

The initiative seeks to connect talented graduates with local job opportunities that apply their expertise while equipping them with world-class practical knowledge and relevant skills, and it does not matter if an applicant does not have job experience.

It targets a broad range of sectors, including the start-up economy, innovation, and creative industries, the digital and technology sector, the green economy sector, financial services, key public and international development institutions, research and development, agriculture, real estate, construction, transportation, and health services. In other words, there is a place for every organisation in this programme.

The Managing Director of Sterling Bank, Mr Abubakar Suleiman, explained that his company supported the programme because of its interest in the education sector as one of five sectors it is presently concentrating investments in under its HEARTs of Sterling programme. The other sectors are Health, Agriculture, Renewable Energy and Transportation.

It will be recalled that as part of its commitment to the reduction of unemployment among youths in the country, Sterling Bank Plc recently renewed its partnership with iCreate Africa to provide a payment system that allows qualified workers to purchase tools and pay in instalments.

Consequently, the bank has also introduced different packages so that skill-seekers can access soft loans to buy tools, and it is encouraging skill-seekers not to let the opportunity slip off their hands.

Also, as part of this strategy, the commercial bank had also expanded its Café One community to Abuja in partnership with iCreate.

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Banking

Zenith Bank Assures Budding Entrepreneurs Necessary Support to Succeed

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Budding entrepreneurs

By Aduragbemi Omiyale

Budding entrepreneurs in Nigeria have been assured by Zenith Bank Plc of all the necessary support they need to succeed and become corporate organisations capable of employing many people.

The Group Managing Director/CEO of Zenith Bank, Mr Ebenezer Onyeagwu, who gave this assurance last Wednesday, disclosed that this was why the bank organised the second Zenith Tech Fair themed Future Forward 2.0.

At the keenly contested hackathon session, the sum of N53 million was won by the participants, with Ecotutu, a cleantech company making cooling affordable and accessible for businesses, especially in the agricultural sector, emerging as the overall winner and taking home the grand prize of N20 million.

This is in addition to a mentorship programme with Seedstars, a company dedicated to implementing high-quality capacity-building programmes for entrepreneurs in emerging markets.

The first runner-up, Foris Labs, an app-based platform that allows students to conduct science experiments individually and in groups interactively via their mobile phones, won N15 million and a mentorship programme.

The second runner-up, Finva, a start-up which helps creditors offer credits at low risk, won N10 million as well as a mentorship programme.

Other finalists who took home N1 million each were Sanwo, Itinu -Ev, Eduvacity, Green Bii, Zion Robotics, Sono Care, Base, and I grow Africa.

Addressing guests at the Eko Convention Centre, Mr Onyeagwu announced that “all finalists would be enlisted into our incubation lab for grooming and mentorship.

“Our expectation is that we are going to scale and grow them just like the zenith brand. So, looking at what we have gone through, I can tell you that so much iron has been loaded on fire. The only thing left is to activate the digital talents, tech skills and entrepreneurship that would culminate in a new digital economy for Nigeria.”

Described as a huge success by participants, the two-day Tech Fair featured presentations on the leading technological innovations that cut across different aspects of life, such as Artificial Intelligence, Computing, Machine Learning, Blockchain, Robotics, Big Data, FinTech, Augmented Reality, Data Analytics, 5G and Communication Technologies, with the keynote address, The Future of Banking: Digital Transformation Journey, delivered by Brett King, the renowned futurist, bestselling author, award-winning speaker, founder of Moven and Author of Bank 4.0.

The event also featured a goodwill message by the founder and Chairman of Zenith Bank, Mr Jim Ovia.

Other eminent IT practitioners from top global brands who also made presentations included Tarik Alatovic, Senior Partner, McKinsey; Juliet Ehimuan, West Africa Director, Google; Ola Williams, Country Manager, Microsoft Inc.; Andrew Uaboi, Vice President/Head, Visa West Africa; Mrs Rakiya Mohammed, Director of Information Technology, CBN; Chris Lu, Managing Director, Huawei Technologies Nigeria, and Dame Ms Adaora Umeoji, Deputy Managing Director of Zenith Bank Plc, amongst others.

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