Lovonus Microfinance Bank has been operating in Nigeria’s wobbling environment since 2012. Today the bank can count a number of achievements including being recognised by the Central Bank as a tier 1 Unit MFB, having met the capital requirement, Onoja Usman, managing director/CEO, speaks more in this interview with Hope Moses-Ashike. Excerpt.
May we know about the bank in terms of when it started operation and its achievements so far?
Lovonus Microfinance Bank started operation in February 2012 currently we are located at Iddo in Lagos.
By the grace of God, we have achieved a lot. We started with a small capital and today we are recognised as a tier 1 Unit Microfinance with close to N200 million share capital. For the regulator to recognise us, it is an achievement. Another milestone achievement is that we are not owing any institution. We are not a microfinance bank that is indebted to any bank and we don’t have any bad loans. It is an achievement.
We also have products. As you know banks are moving towards digital. If you are not a digital bank, you will not have customers. Right now we have signed on with Interswitch. We have also signed on with Nigeria Inter-Bank Settlement System Plc (NIBSS). You can access us and receive payment online. You can send money to any of your people from one bank to another through us. You can also receive your deposit; you can send money from your account.
We are working towards seeing that when our marketers receive a deposit from you, they will lodge it into your account via a mobile phone and you will receive an alert right there and a payment receipt will be given to you immediately. We are in the process of doing that and by next month it will be implemented. Our customers will begin to enjoy that. You can also access your fund through an ATM from any machine or PoS machine. This is already in place.
You mentioned paid-up capital but did not give the numbers, so what is it since inception?
As a Unit Microfinance bank, we started with N20 million and in 2019, our regulator increased the shared capital to N200 million. It divided the Unit MFBs into two – Tier 1 and Tier 2. The paid up share capital for Tier 1 is N200 million, while that of Tier 2 is N50 million. We received a letter from them recognising us to be Tier 1 as at March 2019. Also, this year, we have been approved as Tier 1 based on our financial position.
This means we have met the requirements of N100 million plus as a paid-up share capital and before April 2022, we would have met the N200 million, which is the shared capital for Tier 1. Right now the regulator has recognised us to have met the first threshold of the recapitalisation of N100 million plus. We are hopeful that by April 2022, which is the deadline, we would have surpassed N200 million. So it is a milestone achievement and we are not exposed to any institution or anybody.
Your bank seems to be succeeding when some other ones are struggling – what are you doing differently?
In terms of products that enable us to grow, we maintain the advice from our regulator that we should be doing group lending. Most other people do micro lending. The difference between the two is that if you are doing group lending, you have access to many people and getting your payment will be easy. For example in group lending, you have different groups of 15 borrowers under a group leader. Weekly we have an interface with that leader who collects money for the other members. This makes us have less work. We have 10 group leaders representing about 50 people. The implication is that the rate of default will be low. But in micro lending, you have to meet those people one after another. Here the tendency to default is high. We stick to that advice from the regulator and it is working.
Regarding our coverage areas, we cover Ijora, Iddo, Lagos Island, Oyingbo and whitesand markets .At Ijora market, we have an asset finance product for our customers. We have a special freezer that they use in stocking their goods. If you go to the market, the freezers are branded with our name. It makes the customers loyal to us. We spread the payment for them and they take their time to pay with low interest. It makes them stick to us and default for that product account is zero.
We also have another product called ‘LAFTA’( Lovonus Ajor Future Target Account). This is a savings method for anybody, whether you are a motor park person or a road side trader, you are eligible to save as low as N200 or N500. You will receive an alert immediately and you can have access to your money. The condition is that before you have access to your money, you must have a Bank Verification Number (BVN) after you have completed other documentation. This product we developed three years ago is serving our customers very well. The customers are saving money and if they see what they have saved over time, it encourages them.
Also, we have a yearly saving pattern. It is targeted at associations. In this strategic saving, the savers do not take the money till December. The phone repairers and hawkers are part of this group.
We also have a product called ‘sharp sharp’. This product is for quick access to funds to buy accessories, to repair. You need N200,000 to buy accessories, you can get it. Your repayment is daily , It is being secured by the association. Our marketers make sure they collect the money every day. These are some of the strategies we put in place to enable us to penetrate the low income earners. These are the support we give to them that enable them to stay with us. It makes us not have bad books. We ensure monitoring of our loans with the structures on ground.
Can you speak more on the challenges of microfinance banks?
Generally the economy is not business friendly. Having access to enough funds to reach out to many is an issue. If we have investors that can access our books, and see that our books are clean their investment will help us to reach many whom we are unable to reach. If we have more funds, we reach out to more. Having funds is a challenge because we cannot go and take a loan could erode our little fund. If we have a cheaper fund from investors that will attract long term repayment, it will be good for us.
How did the Covid-19 pandemic affect your operations?
The pandemic started last year and it affected our customers. Most of them demanded an extension of loan repayment and we have an outstanding with them because we are also affected. Because they are loyal to us, we granted them that extension as long as they are paying. So it makes our book not to be bad. It is a natural occurrence. The effect on our book is that it reduced our income, even though we still made profit and met our obligations last year.
In terms of recapitalisation, are you acquiring any bank?
In terms recapitalisation, we are mindful of having any of this relationship, either acquiring or merging. For the fact that we have met with the first tranche of the requirement, we are not thinking of merging with any bank because we have met it. Acquiring will also be an issue and depends on how the books of such a bank are. In acquiring, you may acquire a debt that will bring you down. At the pace which we are going, we do not want to bring in any of that for now.
We know it is not easy for others. If the regulators can extend the deadline for others that will be fine but for us, we are okay.
What percentage of microfinance banks have so far met the first threshold of the recapitalisation that ended in April?
We see new microfinance banks coming up. They already knew the current capital requirements. They will not say they are operating with the old capital requirement. Some of them have the requirement in place before they get approval from the regulator. The regulator cannot give them approval based on the old requirement. So those who are agitating for extension, I am sure their books are not okay, though I do not know their percentage. It is only the regulators that can speak on their percentage. But those that are close to me, I know most of them have met their capital requirement.