Digital lending reshaping microfinance, expanding access to credit – Assets MFB CEO

The microfinance subsector has become a critical stakeholder in driving financial inclusion. Against this background, the Chief Executive Officer of Assets Micro Finance Bank, Emmanuel Bassey, dwells on the role and challenges facing the subsector in a chat with OLUWAKEMI ABIMBOLA

Recently, the Central Bank of Nigeria data revealed that 95.66 per cent of bank debtors borrowed from microfinance banks as of September 2024. What does that say about the role of this sub-sector in the economy?

So, the significant proportion of debtors linked to the microfinance bank subsector reflects the commitment to supporting micro and small-scale enterprises, which are crucial for economic development and poverty alleviation. So, what this data says about the economy is that the sector is actively giving support to the economy and ensuring that we are moving towards financial inclusion by supporting the small-scale micro-enterprises, which of course is crucial for economic development and poverty alleviation, particularly for the underserved populations and small businesses that may not meet the stringent lending criteria of traditional banks.

Do you think digital lending has been instrumental in the rise in credit facilities by MFBs?

Certainly. Digital lending has significantly influenced the operations of microfinance banks in Nigeria, enhancing their ability to provide credit facilities. Of course, this helps streamline loan origination processes. It does help in the digital transformation that enabled microfinance banks to offer more services to people than they would typically, which we all understand that the microfinance bank sector is about grassroots lending and community service.

As we get more connected to the larger world, people are much more digitally inclined and need to be able to get access to financial services right from their businesses. Not many people have the time to leave their business places to get access to financial services. Digital lending has made it much easier, meaning that you can stay in your office and access a digital platform and then sign up for services, put in your details and then, of course, right there and then get what you need.

So, of course, it has increased the subsector’s capacity to give more to more businesspeople loans, of course, as well as more access to financial services.

What are the challenges and opportunities for microfinance banks in Nigeria’s current economic environment, and how is your bank addressing them?

Every business has its fair share of it. One that comes to mind now is high operational costs. With inflation and everything, the cost keeps going up. Banks, of course, also have to get the required rates to match the cost of funds, the cost of lending.

And then, because we have high costs across the board, importing things is much more expensive, taxes are going up, and this affects the retail cost in the market. So, we have challenges across the board, across all businesses, right? And right now, what we do as a business, as a bank, is try as much as possible to understand our clients according to their businesses. We focus more on their business sustainability and growth and ensure that we are giving them the right product mix that will help them grow beyond just giving generic products.

So, as a bank, what we’re trying to do to help our SMEs overcome the operational costs challenge that they currently have is by creating bespoke products that meet the needs of individual businesses. That will help us to understand when their inflow comes in, when they make money, when their business is on the road in the country, when they are importing, for the people that are importing, for the people that are buying, when it is coming in, how it is on the road, and if they have started selling. So, we create products around it, and then we can properly have an agreement on how they would pay and then, of course, help them. The goal for us is to ensure that your business keeps going on so we can keep having a business partnership.

So, that’s one way that we’re trying to help SMEs manage high operational costs. Of course, with the current economic climate, not many businesses are viable enough to get funding. So, they do have limited access to funding, maybe in terms of requirements or maybe in terms of understanding how to go about getting that lending.

So, one thing we actively do is educate them to properly register and align their business to meet regulatory requirements, ensuring that they pay attention to what’s important. You can’t have a business, and you’re not registered. Why are you not registered? Why are you not seen in the eyes of the law? And then you can properly track your income and cash flow so that you register it, and when questions are asked, you know how to defend it.

So, many SMEs just want to focus on buying and selling without properly putting accountability to it such that you can present a proper financial document to prove that you have a viable business that is deserving of funding. So, we educate them a lot on how to run their business and on how to document their activities. That way, you can get the funding that your business deserves beyond just basic lending.

Of course, we know that in many rural areas, the banking culture is such that people go the informal way more than approaching a bank to get credit. There are a lot of people who are just in the market, just giving out money, and then they are saving their money with unregistered practitioners.  And that usually causes a lot of mess and then gives a bad name to the sub-centre.

So, one of the things that we do when we go into the market is tell them to make sure their money is in the CBN-licensed, NDIC-registered institutions so their money is safe. Then you have a good track record to ensure that when you approach an institution for lending, you have a good basis for them to consider you for funds.

Does that mean your bank is actively involved in the businesses that you finance?

That’s why we’re the neighbourhood bank. We’re right there, just by your side. Come in, and let’s discuss what your business’s current issues are. We understand the issues based on the sector of the business, and then we give the right advice and, of course, the right amount of funds that you need to scale your business responsibly.

So, yes, we are actively involved in the businesses of our clients and their growing concerns. That’s what gives us the confidence to lend responsibly.

With the emergence of fintech companies, how do you think MFBs can stay competitive in the evolving financial services landscape?

The microfinance banks are here to serve. They have to serve customers. They have to serve people, and people’s needs evolve daily. There was a time when social media wasn’t a thing. Right now, social media is very popular.

Everyone is active online. A large percentage of people are actively consuming digital information and digital platforms. And if you have a large number of people who are in this space, it typically means that we as microfinance banks need to also get competitive in that space.

Meaning that you have to find ways to integrate fintech or financial technologies into your products. That way you can serve your customers better because you have to pay attention to customer experience. You have to pay attention to reducing operational costs.

And if this fintech product will do that for you, we must do that. So that’s what MFBs are currently doing. Most MFBs are gradually getting to the point where they’re taking advantage of fintech infrastructures available to serve customers better, streamline their loan process and disburse their repayments to make it very seamless.

Gone are the days when MFBs would have people walking to the market to get repayments and stuff. Now SMEs can just go in and pay into their account. It will be recognised immediately as payment.

So, the MFB subsector is taking advantage of the fintech infrastructure that’s available because it actually helps in staying ahead, and of course, it helps in ensuring that your customers have the best experience possible. Because at the end of the day, we’re here to serve people, and then serving people is giving them a good experience and making them happy, and that’s what we’re doing. Some MFBs do collaborate with fintech institutions to give this service.

So, there’s room for collaboration, there’s room for partnerships, and then if you have capacities funded, you can build your infrastructures yourself. Talking about Assets MFB, we have built our own infrastructure; we have redefined the process of taking lending. All of our lending activities are online and accessible via the mobile internet, and then, of course, it doesn’t take away the importance of people. People-to-people relationships are important, so we have one-on-one relationships with our clients, meaning that we have account officers who still go and visit, have conversations, monitor the transactions and keep up the relationship beyond the digital platforms that we have.

Your response indicates that for MFBs, fintechs are partners, not competitors

There’s no need to compete with fintech; just partner with them to grow or build your own infrastructure. So as much as we explore partnerships with fintech firms, we are active participants in the digital banking space, and that speaks to our mobile app, Monietree, that’s on the Play Store for individuals and businesses to use to scale and grow.

Like I said earlier, we are about person-to-person relationships and growth, so we pay attention to every aspect of human life and the human needs. What do you need to grow? Do you need funds? Do you need an opportunity to invest? Do you need tools to help you manage your business? Those are things that we put together in our digital platform, MonieTree, and that’s what our clients are currently using to scale.

For clarity purposes, how have you been able to use technology to enhance financial inclusion in particular? Have you already spoken about the service delivery aspect?

Okay, financial inclusion is typically getting people to be bankable and getting people to be in the banking system. It is about meeting people where they are and giving them the service that they require. As I said earlier, people have changed, and needs have changed. Right now, people are much more susceptible to using digital platforms, so we built a digital banking platform that has comprehensive financial service tools and needs and then took it to clients. They can access it from their homes, access it from their phones, tabs, laptops and everywhere else, and it’s secure, right? So that’s how we’ve been able to improve and get people to be much more digitally inclined, of course, and support technological advancement.

So, we built an app, got them to use it and got them into the banking system, of course, and people are currently using it.

When did you assume office as the CEO of Assets MFB, and what are the biggest challenges so far?

I’ve been the CEO of Assets MFB for over a year now. The biggest challenge for me would be what we’ve been talking about, digital advancement and digital transformation.

Constantly, we get requests and the yearning needs of clients to be much more digitally inclined. Then, one of my major tasks is to find a way to transform our service digitally to be able to serve clients near and far. We’ve got some clients who have moved and hoped to expand their business to different locations and still want to continue accessing and taking advantage of the advisory services that we offer. Because beyond banking, we take very seriously the lifestyle of our customers.

What do you need to grow? What are your next steps? Because these businesses are expanding, the business heads typically will move to different locations just to manage the business, and they want to keep accessing our services. The only way that could have happened would be through our digital tools, and we had to build something for them to use, and that’s how we came about MonieTree. That is about powering prosperity.

Of course, operational costs are a major challenge. Cost is a major thing everywhere, but we’re doing what we can to make sure that we reduce costs, improve productivity and, of course, make the workforce happy. That’s what we’re going to do.

So, given the microeconomic challenges that we have and conditions in Nigeria right now, in terms of inflation and currency devaluation, how does your bank manage the issue of credit risks and non-performing loans?

Managing credit risks and non-performing loans boils down to having a robust credit risk management framework. We have established stringent credit risk assessment procedures to evaluate customers’ borrowers’ creditworthiness, ensuring that their loans are extended to clients who have demonstrated repayment capacities.

The business is the first and foremost for every lender. Make sure that there’s a business and there’s a business head who knows what he’s doing. When you analyse that and check all your credit risks, you’ll be fine, largely. Of course, continuous monitoring helps in determining if there will be problems along the way. You don’t give loans and go to sleep. You give loans, and then you monitor to make sure that the loan purpose is actually met.

If you keep monitoring, you will see early if there’s going to be a problem, and then you can quickly find a solution to it. What we do is, beyond increasing interest rates or trying to make sure we are profitable, we pay attention to the businesses and the peculiarity of each business and determine rates that apply. That way, we focus on ensuring that our clients’ businesses are sustainable, and they become our partners. That way, their business succeeds, and we succeed because if they’re happy, we stay happy, of course. And then there is regulatory compliance and capital adequacy that are set by the Central Bank of Nigeria that we make sure that we do not go over.

We maintain adequate capital buffers, and we solve every potential loss that might arise.

Looking ahead, what is your outlook for the year in terms of the business environment in Nigeria?

So for economic growth, the Central Bank of Nigeria projects a GDP growth rate of 4.17 for 2025, and that’s an improvement on the 3.36 recorded in 2024. Similarly, the World Bank forecasts a growth rate of 3.3 for 2024 with an average annual increase of 3.7 from 2025 to 2027. This positive outlook is attributed to ongoing government reforms and the oil market getting stabilised.

So, we’re looking forward to having better economic growth in the coming quarters. But despite growth projections, inflation remains a concern, which has led to increased living costs and operational expenses for businesses. While the government is implementing tax reforms, enhancing revenue and all that, we as a business try as much as possible to not overload our customers with unrealistic rates that will push them to losses or not being able to repay.

We have more or less diversified our products in a way that will suit customers’ businesses on a short-term, mid-term, and long-term basis. That way, we can find the one that fits and help them keep their businesses running. Ultimately, the reforms the government are introducing will typically, as long as the oil industry is stabilised, we think we’re going to have a positive Q2, Q3 and Q4 2025.

What are the strategic priorities for your firm for the next five years?

For the next five years, we have huge plans. Of course, product diversification, geographical expansion, and capacity building.

The bank is looking to be a national bank in the next five years. Of course, to keep expanding its products. It’s important to introduce a broader range of financial products because, as I said, there are diverse needs for individuals and small businesses.

And thereby, as much as we’re creating products to fit this, we’ll be fostering economic growth. And of course, geographical expansion is one key thing we want to do. We want to reach more underserved regions and more communities to give them access to essential financial services.

And capacity building is very important. It’s one of our key cultures. It’s to continue to help staff develop, continue to help SMEs develop, understand their business, understand the industry, and understand their sector. Because the more they understand how to manage their businesses, the less it is for us to have issues with non-performing loans and put our portfolio at risk. So, we keep training those SMEs. We keep helping them get better.

We keep training our staff and keep helping them understand the latest realities. And of course, the more we do that, the more we become much more positioned for a better future. So, the next five years are going to be interesting.

And then, of course, we’re going to be much more technologically inclined in the next five years. We are becoming more of a digital bank in 2025 to get people to access our services more.

By extension, what do you think will be the outlook for the microfinance sector in Nigeria in the next five years?

I see more of the sector innovating through technology. I see them integrating cutting-edge technologies into operations that will provide efficient and accessible financial solutions. Of course, in the next five years, the journey of financial inclusion should be driven much more aggressively.

For us as a bank, we want to bridge the financial accessibility gap by offering tailored services. I see the more the MFB subsector continues to evolve and expand to meet that objective.