The Chief Executive Officer of Baobab Micro Finance Bank Limited, Dr Kazeem Olanrewaju, in this interview with Eromosele Abiodun, says the directive by the Central Bank of Nigeria that commercial banks should increase their loan-to-deposit to a minimum of 60 per cent cy will stimulate economic activities and be beneficial to microfinance banks. Excerpts:
Your bank is celebrating its 10 anniversary. Can you to tell us about the journey so far?
The journey started 2009, when we got our license. But we opened our first branch in March, 2010 and we made our first disbursement in 2010 in Kaduna. Like most institutions, we started from a very humble background in one shop in Kaduna; from there we grew to about six branches in Kaduna till 2015 and in 2016, we got the national license that brought us to Lagos and Abuja. So, today, we have about 20 branches in our network and we are still expanding.
The journey has not been easy, but with the help of God and good strategy, we have seen ourselves where we are today. There is no doubt that we are one of the leading institutions in this sub-sector in Nigeria by whatever parameters you want to measure. Whether it is by the number of customers, the asset base, number of branches, financial performance in terms of profitability, the earnings, the staff size, we are number one.
So we have come a long way in10 years and we are starting another slate and trying to build on what we have done. One is happy to say that we have seen growth consistently in the last four or five years. Every year has been better than the previous year and we hope that this can continue for a long time to come.
You operate in a very tough environment. Can you tell us some of the challenges faced in the last 10 years?
We faced a lot of challenges. Firstly, for the first five years, I was not in this institution, but I read through all that happened and I know that there was a challenge trying to establish in Kaduna with limited infrastructure. Of course, with the customer base, per capita income and population and everything, among the national microfinance bank, we were the only person that started from Kaduna. There was no other one that started from Kaduna. Only one started from Abuja which does no longer exist. The issue of insecurity that came up, the Boko harm crisis which we have been battling with, of course that made it impossible for you to get the best hands to even work in a place like Kaduna because nobody wants to go that area, so we had to make do with what we have and train the people and see what we can get.
Then you also talk of the fact that the market is limited. We started in a place where it was difficult to expand. So, we had just six branches in five years. It was not that easy to grow, so if you want to talk about staff, there were not there. Customers, branch network and financial resources were limited. The type of banks that were coming to give us some form of on lending fund in Lagos were not ready to do that in Kaduna because they simply cannot see you.
Then the issue of deploying the products that we have, because of the limited demand in Kaduna, we couldn’t do so many things. So all these summed together explained to you that it was very challenging. But also a very good place to start, when you start with a very challenging environment, and you move to some other environment, the challenges are different. What we see in Lagos is different from that of Kaduna. In Lagos the market is there, but you have people that are very high and financially literate, so it is difficult for you to bring any garbage and people will buy it. Then you have a lot of competitors in Lagos and a lot of people who willingly default in Lagos. So these are two different markets with different kinds of challenges.
One place, the business is not really there, but the customers are what you want them to be. The other one business is there, market is large, but there are a lot of competitors and customers are so literate, some of them are out to do fraud from day one and default is very high. Of course in Lagos it was easy to find funds unlike in Kaduna where to grow the deposit was really challenging. I can tell you that since we came to Lagos, our deposit has jumped by more than 10 times in like three years. So there are different opportunities and challenges coming.
How were you able to overcome these challenges?
Let’s start with the people that matter most which is the staff (getting the right hands). We have very dedicated and loyal staff. I think as an organisation what we have done is to be able to train them. We have trained people to think in the way we want them to run the company and a lot of them follow this and that has helped us. So training, good manpower, loyal dedicated staff, and the other factor is to emphasis your strength. There are areas if you look at the microfinance bank maybe we will not be counted.
There are areas too that we are doing very well, better than most microfinance banks. So we emphasis our area of strength and try to build on it while we try to correct areas where we have deficiencies. For instance, our loan book is one of the best in the country. In terms of the risk, while some people are saying it is impossible to get their repayment, I can tell you that in the last four years, we have never had a portfolio at risk, people that are supposed to pay back your loans and didn’t back at the particular time, for instance 30days has consistently been less than 3 percent. While some people are telling you theirs is between 15-20 per cent ours has been different.
So part of this is what helped us and then our customer selection too, it is not all comers. It is also very important to say that it takes on the average four days to process our loan, but it is subjected to maximum scrutiny. So if you pass through our system, I can to a very large extent say that you’re very good customer. We meet our words to the customers in terms of commitment, timing, prompt delivery of services, also we tell the customer that they are pay as it when due. In terms of efficiency and strictness with repayment, we are high up there.
So if you’re not a good customer, we don’t need to tell you, you will not even come to us, you will find your way and go elsewhere, of course there are so many microfinance banks in Nigeria. However, for the good ones, who want to do business and wants efficiency and good services they will always come to us. I think the other thing that is very important to mention is the support we enjoy from our shareholders and from the group. We have shareholders such as the International Finance Cooperation (IFC), PROPACO, Boabab, which used to be Microcred. All have been very supportive by given support in finding funds, market studies, product development, and so many other things, they have been very open to supporting us.
So those kinds of shareholders you are also very happy to push forward. Then we have a board that is very dynamic and made up of serious minded people and they have been very supportive too. I think a combination of all these and of course every product that we bring out is tailored towards the market. So there is a market study, you do your investigation and you come up with what the customer will prefer and so we hardly have a situation where you launch a product that fails because we will do all the rigorous work that is needed to be done. Let me say and one of the things which is most important is the good management.
The kind management we have here is the experience, dedicated and loyal people who are forward thinking. A lot of people tell us we have achieved so much, but for us we have not even started. So based on the management team that I see, I’m not in doubt that this company will not grow by leaps and bounds in the coming years, and I can tell you that it is just a matter of time; we will overtake a lot of the commercial banks.