John Own, managing director of Unical Microfinance Bank Limited, in this interview with MIKE ABANG said it was not true that the micro finance banks in the country are being used to fund election campaigns as being alleged. He also spoke on other issues. Excerpts:
What is your impression on the recently launched MSME clinics in Cross River State by the Acting President?
Small and Medium Scale Enterprises are usually the catalyst for growth in any growing economy and so what the Federal Government is doing is to see that the right environment is created so that small businesses can thrive. They also told us that small and medium business may be able to access credit facilities at single digits. They also said that many of the state capitals have BOI where they can go. Bank of Agriculture, all of these Government agencies that are suppose to propagate and help the small and medium enterprise were all there, I can tell you it was a success as those bottlenecks with those agencies are now removed to a large extent.
I will like to take you back to the issue of signing the two bills into law by the Acting President to boost MSME, the Collateral Registration Acts and Credit Reporting Act 2017. What is your impression about this?
It is very timely, you know; let take the first issue which is the collateral Registration Act, the Micro small businesses do not have tangible collateral like houses and land properties. So some of them who might need facilities, that is the bottleneck, they have the idea and the business accruement but the approach to the financial institution for loan facilities, they say bring this and bring that but what that bill is saying is that for small and micro business you can use your receipt for instance you have a generator, a car, you use that household item receipt to register with financial institution as a collateral to obtain loan facility. So when you use the item, it is unloaded into the National Financial Collateral Register. You cannot use the same item again with another bank to obtain credit facility. If you use it, another bank will see it that you have already used the item to obtain loan from the collateral register. You can continue to use your generator but you cannot use it to obtain bank facilities from another bank. Should there be any default, you have lost that generator because it is collateral you granted. So that collateral register for financial institutions is very important for movable assets not tangible assets register. This bill has made it possible for small and medium business to use their movable assets and obtain credit facilities from the banks. The second one which has to do with registering credit, all he is saying is if Mr. A has borrowed from bank A that bank should put into the platform a credit registry that Mr. A has borrowed and now you want to borrow from bank B, bank B will approach the platform to see the performance of your loan with bank A. so what that means is that the banks are mandated to put what Mr. A has borrowed into the credit register of banks for reference nationwide. This is because we have some people who go to borrow from the bank with initiation of not paying back and it will be known that if you borrow with an intention of not paying back, the information will be available to other banks for history. It is also mandatory for all banks to make an inquiry to the credit registry before they can grant loan. This makes those who are credit worthy people to access bank loan. This bill is design to improve the financial and credit system in financial and credit portfolio of financial institutions to continue to be health. After the signing of that bill, the banks will no longer be skeptical on granting of loans because the credit registry is now in place. Banks are under obligation mandated to upload every credit into the credit registry system.
In a situation where a customer takes loan from the bank and such loan is not in the collateral registry what happens
That is why I have told you it is mandatory and if something is mandatory, it means it cannot be flouted. I may not have the exact sanctions there will be sanctions for not providing information for the other banks to enable other banks know that you have given a loan to this customer. all I want you to know is that, it is not prohibited for a person to take loan from two banks and you know with BVN, it can be traced that you have taken a loan from two banks but it must be know that this customer borrowed from the banks. The banks can also do syndication by giving one customer on the same basis provided that customer have the credit capacity for the two banks to share same property on same basis What is important is that it is obligatory that if you give a loan, you must put it on the credit registry platform to give others information, if you don’t, if the dates of the loans you have given is traced, and you did not give such information to the system, there will be consequences of sanction for that action.
What are the major challenges with the BVN; some customers were given deadline to ensure BVN registration by the CBN?
Our major challenges are the BVN machines and the micro finance banks do not have the financial muscles to own a BVN machine which costs between N9 to N10 million; so what the micro finance banks are doing now to comply is the CBN has directed that we work with inter-bank management system. The National Association of Micro Finance Banks are also working with Nigerian Inter-Bank Services (NIBS) to get BVN machines for our customers registration or our customers will go to our correspondent banks to register with a valid means of identification because what BVN is all about is to show an acceptable means of identification like the voter’s card, etc.
Are you optimistic that all your customers will meet the CBN deadline or will the micro finance banks seek an extension of time by the CBN?
We hope that all our customers will do their registration but you can remember what transpired between their conventional banks on BVN registration where people waited till the last day before they go and do the registration exercise therefore crowding the banking hall but from the exercises of money deposits to banks, a customer who does not do the BVN registration is only putting himself in a position where he will not be able to operate his account after the deadline. Our duty is to sensitise and mobilise the customers to do the BVN registration. Just like the rural areas where there are no money deposits in banks what we are doing now is to take them to the cities for registration.
At the end of the day, where many of the customers cannot do the registration, particularly those in the rural areas; will you as a body approach the CBN for extension of time?
We will explore that, we are already contemplating approach to make a presentation to the CBN and until we get there, we are encouraging our customers to register for the BVN with the money depositing banks across the 36 states of Nigeria. There is time now and I am calling on all our customers to come and register now.
There is an allegation that the Microfinance banks are being used to fund election campaigns by politicians; that they launder money through that avenue. What can you say about that?
That is not true exactly, as we do our transactions with all sincerity. We report every transaction above 1million naira to the CBN or the co-operate institutions. If it was before when we did not have BVN registration but now, no microfinance bank can get involved in illegal transactions without being reported. Such allegations of illegality by the microfinance banks are not completely true. We are not being used to conceal ill-gotten wealth.
In what ways are the microfinance banks partnering to promote Agriculture in Nigeria?
We are partnering to promote Agriculture value chains in various ways; for instance, we partner with KUSO youths to promote agriculture by giving them loans. If you go to Calabar South Local Government Headquarters Anantigha field where the women are planting water-leaf, we partner to give them small loans to enable them plant their water-leaf farm.
What is the extent of loan facility that you can give to the water-leaf farmers?
I can assure you that these women get little loans as small as thirty thousand by coming into groups to apply and they get very happy to get such loans. If you go to the University of Calabar Teaching Hospital field, where the women are farming as well as those in Akpabuyo Local Government Area, they all benefit from such loans. The good side of these classes of people is that they pay their loans promptly.