Alert Microfinance Bank limited, which recently got approval for State licence from the Central Bank of Nigeria (CBN), aims to extend its footprint to other African countries, targeting N42 billion loan book in 2024, targeting fourth MFBs in the country, Olanrewaju Kazeem, group CEO, gives more insights in this interview with Hope Moses-Ashike. Excerpt.
Is Alert Microfinance Bank a subsidiary of Wema Bank?
Firstly, Alert is not a subsidiary of Wema Bank. If you pay attention to the spelling, it is ALERT, like the regular alert you get, such as an SMS alert. The spelling of Wema is not the same. When we registered this name in 2013, Wema had not even considered Alert, so there is no connection. While we have a good business relationship with Wema, we are a separate company, not a subsidiary. We do not share ownership or have any relationship indicating we are associated or subsidiary. No, we are Alert Microfinance Bank, Nigeria Limited, and we are Alert Group, not Alat, there is a difference in the spelling.
When did Alert MFB start its operations, and what is the growth rate?
I’m not the CEO, but for Alert Microfinance Bank, it will be 10 years by January 2024. It started in January 2013 and has grown significantly. Initially, it was a Tier 1 MFB, restricted to one branch in one state. Later, it upgraded to Tier 2, allowing two branches. Recently, the Central Bank approved a state license, meaning Alert MFB can have branches across the entire Lagos state. The company started with about N27 million in 2013, and as of now, the balance sheet is over N10 billion. The Central Bank also approved the opening of 10 new branches, aiming for at least 10 branches across Lagos before June 2024. The company has been profitable since 2014, and we look forward to celebrating the 10th anniversary with our long-standing customers.
You mentioned getting approval from CBN for a state license. What does this mean for the bank, customers, and generally?
The approval of the state license is significant for Alert Microfinance Bank. With over 15,000 customers spread across Lagos, the new branches will ease the crowd in existing branches. Customers will not have to travel far to access our services. We are also heavily investing in digital channels, with less than 1% of transactions being cash. However, having physical branches is crucial, especially for savings customers who value a visible presence. This license means an increase in business. The projected investment for the next year is around N42 billion, emphasizing proximity to customers, especially in the Small and Medium Enterprise (SME) space. The state license allows us to have branches close to business owners, meeting both their expectations and the company’s expansion goals. It is a big deal, and we anticipate that it will propel our business growth, providing more touchpoints for our customers.
Over the past few weeks, the country has been grappling with a cash crunch in the banking system. How has this impacted your microfinance bank’s operations?
In response to this challenge, we have been actively encouraging our customers to transition from cash transactions to our digital channels over the last two years. Our mobile app, USSD, and internet banking options are swift and efficient, facilitating easy transfers through partnerships with platforms like NIBSS. While some customers express concerns, particularly as they approach the holiday season and seek cash, our digital emphasis has minimized the impact on our business. Typically, our branches might not handle cash amounts exceeding N200,000 in a day; instead, we prioritize digital transactions. Disbursements are exclusively conducted through our digital channels, even though we understand our customers’ desire for cash during these times.
Depositing money in microfinance banks (MFB) used to be a challenge, as individuals would turn to MFBs for loans but opt for commercial banks when depositing money. This has posed a significant challenge to the sub-sector, especially considering the recent cash crunch with drastically low money flow, making depositing even more difficult. How are you coping with this?
The current economic situation is undeniably tough, with people struggling to manage daily expenses due to factors like currency devaluation, the removal of subsidies, and increased insecurity. This has led to high rates of food inflation, limiting people’s spending and saving capabilities. Despite these challenges impacting the sub-sector, we have endeavored to emphasize our role as a customer-focused company capable of adding value. We offer rewards for customer savings and boast of the best rates available. We acknowledge that, even during inflation, our interest rates may not be as high as the inflation rate, ensuring customer satisfaction.
Despite the difficulties, our deposits have seen substantial growth from about 1.6 billion to approximately 6 billion. While it may not be accurate to say people avoid putting money in the microfinance space, the reality is that with a loan portfolio of about N9 billion and deposits around 6 billion, we have sought additional funds, sometimes through loans from commercial banks or borrowing from development institutions. This contributes to the perception of higher interest rates in microfinance banks due to the elevated cost of funds. Nonetheless, we have introduced attractive products and advanced technology to support businesses seeking loans and streamline collections.
Admittedly challenging, we are actively addressing these issues. The perception of microfinance banks gaining prominence in Nigeria suggests that the challenges may not persist for an extended period. With our efforts to catch up and stimulate patronage, especially through technology investments, we anticipate increased support for microfinance banks in the market. As an agile and young institution, we are committed to introducing initiatives that will further invigorate the market.
You mentioned lending around N20 billion this year and aiming for N42 billion next year. How does the repayment process work for these loans?
While we strive to expand our loan book, growing more than 200 percent, we have observed a decrease in defaults due to our robust risk management practices. We carefully assess the market and focus on segments with strong cash flow to support lending. Additionally, we provide incentives for timely repayments and encourage customers to proactively fulfill their obligations. Currently, our past due (p.a.) 30 days is 4 percent, within the CBN allowance of up to 5 percent. Despite the challenging economic climate, this performance is reasonable. We selectively engage with customers, avoiding chronic debtors and those with a history of defaults. For customers with consistent on-time payments, we offer increased loan sizes, favorable interest rates, and tailored conditions. This approach, considering behavioral factors, helps shape positive customer behavior, contributing to our strong payment performance in the tough economic landscape.
Where do you envision Alert Microfinance Bank in the next three to five years?
Our plan, as outlined by the board and management, is to position Alert MFB among the top 4 microfinance banks in Nigeria within the next few years. Following this achievement, we aim to extend our footprint to other African countries. We recognize the significant role Nigeria plays in addressing the challenges faced by Micro, Small, and Medium Enterprises (MSMEs), especially with the African Continental Free Trade Agreement in place. We believe that organizations, rather than just the government, have a responsibility to contribute to solving these issues.
Our vision extends beyond Nigeria, and we aspire to be a major player in the MSME space across Africa. While “charity begins at home,” we plan to start and excel in Nigeria, and within four years, expand our services to contribute to the economic growth of the entire African continent. The current economic challenges often lead people into crime or risky endeavors in search of better opportunities. While we acknowledge that we are a relatively small company, we believe that collective efforts across various sectors can make a meaningful impact. Our focus is on testing our capabilities and assumptions in Nigeria first; once proven successful, we intend to scale our MSME support services across the African continent. We hold both a Nigerian dream and an African dream, and we are committed to realizing these expectations.
To initiate Point of Sale (POS) cash transfers and compete with Microfinance banks such as Moniepoint, Opay, and Palmpay, what steps can be taken to attain that level?
To progress towards Point of Sale (POS) cash transfers and compete with Microfinance banks like Moniepoint, Opay, and Palmpay, our strategy revolves around substantial investments in technology. While our approach has historically been more aligned with traditional banking practices, recent initiatives indicate a shift. Our mobile app and internet banking platforms are top-notch, and we’ve recently concluded a POS pilot program. In addition to physical POS machines, we’re deploying virtual POS solutions.
Our account opening process is fully online, ensuring ease of access for individuals. We’re also developing a seamless transaction system to enhance user experience. The board is actively committed to investing heavily in technology, positioning us strategically in the dynamic financial landscape.
In contrast to some other Microfinance Banks (MFBs) that may focus on specific niches or segments, our approach is comprehensive. While Moniepoint, Opay, and Palmpay excel in enabling transactions, particularly in rural and remote areas, we are integrating technology into our services. Notably, our focus extends beyond just facilitating transactions. We’re exploring aspects such as assessing creditworthiness and supporting business growth. The recent acquisition of a license further enhances our capabilities, and we are eager to see the outcomes of these technological advancements.
