Leo Armel Tchoudjang Nzoutchoum, chief information officer, AB Microfinance Bank Nigeria, speaks with Anayo Ezugwu, staff writer, at the Future Banking Tech West Africa in Lagos, in April, stating the challenges facing microfinance banks in Nigeria
Realnews: What are the challenges facing microfinance banks in Nigeria?
Nzoutchoum: When we look at the Nigerian context and landscape, I think we have several set of challenges that to some extent are common to most of developing countries. So we are looking at the issue of infrastructure. Infrastructure from different angles, from the angle of power supply; being able to move from one area to another, not taking hours and issues like that because this at the end of the day affect the productivity of a loan officer that is supposed to produce more loans per day. Also some microfinance banks have the challenge of cost of distribution. But this is purely linked to their operating model. Another challenge is linked to funding. Cost of funds in Nigeria is really expensive for microfinance banks. The industry has suffered in the last 10 years but there have been some consolidation. Some microfinance banks are going bankrupt. This does not help to bring trust in the market and this affects the ability of some clients to deposit money into microfinance banks. I believe these are the key challenges I can readily picture now. Basically infrastructure is very important because it really has direct impact on the operating expenditure of the microfinance banks.
Realnews: During the panel discussion, the need for collaboration among microfinance banks was emphasised. What do you think is the reason why collaboration is lacking in the sector?
Nzoutchoum: First of all, yes, collaboration is important but we also need to understand that collaboration is a journey. We also have different levels of collaboration. Microfinance bank is a peculiar business structured in such a way that is actually difficult for an external party to understand details of the business. So when you want to collaborate, you want to understand the details of the business and you want to make sure that the partnership between the two parties is aligned accordingly. This is on one side, I think collaboration has been happening but we just want it to happen more at a deeper level. This is where we see new players like FinTech and most likely telcos.
Realnews: What of collaboration with the mainstream commercial banks?
Nzoutchoum: There is collaboration with commercial banks because some microfinance banks used to use some commercial banks for corresponding banking like cheque clearance and other issues like that. There used to be collaboration but now we need it to happen more at a deeper level in order to bring efficiency in the market because the whole idea is to disburse loans with lower interest rates and to make the market sustainable.
Realnews: To what extent do you think that microfinance banks are ready to embrace FinTechs?
Nzoutchoum: FinTech comes into the banking space with a different perspective because they are coming from the technology side in order to serve specific needs of the market. Usually FinTech will not cover the full ecosystem of the microfinance banks but we do know that FinTechs are really good at the technology they have. I think that collaboration will be required between competitors in order to utilise technologies that the FinTechs are deploying. But this is not easy because when you want to collaborate, you want to collaborate for a long term. We are not looking at it as a service provided but we are looking at it from partner point of view. So at the centre of its all business should always align to make sure that your partners do not exceed the expected limits.
Realnews: What is your take away from the summit?
Nzoutchoum: The different players in the eco-system have understood the way forward, what it means and what needs to be done next. We all talked about digital transformation and it is not an easy journey but we need to implement it to make it a success and to remain successful while implementing the technology. The takeaway is that I see a lot of dynamism at the different level of the ecosystem at the regulatory level, commercial bank level, microfinance bank level and FinTech level. This is good. I think it is good to talk about it. I believe that innovations will come through this type of summit. It is also an opportunity to raise some of the bottlenecks we witness in the industry. But the whole idea is to do it in a constructive manner and we need to have more of this kind of summit to bring key players together to discuss key issues and also the way forward.
– May 3, 2019 @ 15:39 GMT |