Dr. Kazeem Olanrewaju is the Managing Director and Chief Executive Officer (MD/CEO) of Baobab Microfinance Bank Limited.
In this interview, he speaks on the impact of COVID-19 and the #EndSARS protest on the operations of the bank and on how the bank is faring in the North despite the insecurity in the region.
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What are your experiences following the disruptions occasioned by the COVID-19 pandemic?
The impact of COVID-19 on the business of the bank is real and is the same worldwide and for all the businesses in this country.
We have impacts that are financial and we also have health impact, regulatory impact and business impact.
If you look at the issue of health, staff now have to wear masks and observe all the protocols.
Apart from the fact that it’s not really easy, it is also expensive. Same thing goes to the customers where they have to wash their hands and also observe protocols.
In terms of physical impact, you will discover that the government had to come out with rules and regulations that made it almost impossible to do business at some point, especially in April when we had a total lockdown; which means that within the period, you couldn’t do any banking activity except online because the whole system was shut down.
So we could not take deposit, I mean people were paid but they couldn’t work.
In the same month of April, we recorded our lowest business activity in connection with all the restrictions concerning COVID-19.
Now, even the existing businesses were impacted.
The loan book, because we expected that customers would be able to make their repayments, but since businesses were shut down, they couldn’t do any repayment.
So as a bank we had to undertake what we call loan restructuring; this was done in three ways; people who could pay all the arrears, we allowed them; and the second category were people who could pay the arrears and still stay within the tenure of the loan; and then we had another category of people who requested for extension of the loans because there was no cash flow for them to be able to pay.
All these came at a cost to the bank, because as at the time we granted these loans, the understanding was that customers would pay back at a particular time, but COVID-19 made that impossible and we cannot collect the money in the people’s hands and of course we cannot charge them for holding it because it is not their fault.
So that resulted to reduction in our profit expectation for those periods.
So what lessons have you learnt so far, and how are you trying to grapple with the new normal way of doing business?
There are many lessons to learn. First, is the impact of COVID-19 and the #EndSARS protest on our business, because we have never had things like these.
If you look at the system, it was not designed to take care of issues like this. So, the first lesson is that we now understand that this kind of disruption affects customers’ businesses, and then as a bank we must have a way to address that; to help the customers, that was why we came up with the idea of restructuring.
This is the first time the bank is doing restructuring, even by regulation, the Central Bank is very strict in restructuring.
The role of technology in doing business, before now, it was very easy to meet somebody, do your business and just do the things you normally do, but today we have learnt that if you don’t have technology, you will be out of business in no time, and that is why we have created our Digital Transformation Department, which is meant to oversee all the digital channels we want to deploy as a bank.
So, I can tell you with all confidence that we have our cards running, we have our USSD codes with which you can use to make transfer and we are also working on so many other things.
We are working on a software for agency banking; all these came, even though they were in our plans, we wouldn’t have rushed to do them, but now it is compelling that we conclude all of these, and it is coming as a result of COVID-19 where it has become almost impossible to have human to human relations.
So part of the crisis management is the new normal, which we have learnt.
Considering the new normal, is your bank planning to embrace agency banking?
For our agency banking, we have two or three models in mind, which we are going to run in parallel.
One is to work with existing agents belonging to several organizations, they are already existing, they have their offices, they have their shops, it is just to introduce our App to them and customers can access our services by going to them.
The second one is our own agency network, where we are going to provide them with all the equipment that they need in their shops to attend to customers. Now when you go there, what you see is typically the front end of our system.
So, they can check for their balance, collect money, pay you using our own technology.
The third is going to be strictly fully driven by technology, where we will have those agents at points where people can go there, but we will do all our transactions on phone.
For instance, you can make a request like you need money and it will give you a code and you will go and meet the agent and collect your money.
The agent has no role other than to accept and give you money.
For places where we don’t have branches, our plan is to start by introducing the smaller units of loan, micro loans so that people can go to these agents and be able to access it easily.
That we are starting next year, actually we were supposed to take effect this year, but because of the effect of COVID-19.
Would the services that would be rendered by agency bankers not equate the bank with quick loan platforms?
It is not the same thing with the quick loan platforms; maybe a portion of it will look like lending, but that will be a small unit, that is when someone asking for a small loan of N5,000 or N10,000.
We don’t need any evaluation for those amounts.
For the micro loans, you don’t need any kind of evaluation, but if it’s getting to higher values, then definitely we will need to do evaluation.
We have security challenges in the North, how has the bank been able to support businesses there?
I want to say without any contradiction that we are the largest microfinance bank in the North today.
We started in Kaduna, and today in Kaduna and Abuja, we have nine branches and we are opening the 10th one in Jos.
In the whole, we have 23 branches; 10 in the North and 13 in the South. Of course, this is not abnormal, when you look at the insurance and financial institutions in the country, they are much more concentrated in the South West, and so having 13 branches in the South and 10 in the North looks like the normal trend.
If you want to talk in terms of the support that we have granted to the North, in 2020 about 45 per cent of our loans were granted in the North.
We have granted over N20bn in loans. So if you do 45 per cent of it in the North, at least you have over N9bn that has been disbursed in the North; and in terms of the number of customers in the North, on the average we have 1,300 to N1,500 every month, so in the year, we had at least 18,000 people that benefitted from our loans.
So far what has been the repayment trend in the North?
Before COVID-19, the performance of the North in loan repayment was much better compared to that of the South.
So if you want to talk of repayment, people who borrow in the North pay very well; it’s similar to what we have in the South, but when you compare them, it is better to what you get in Lagos.
Globally we are doing more than the benchmark by the Central Bank of Nigeria (CBN).
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