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CIBN, others sign agreement on Fintech certification

We exclusively focus on SME lending – Auto Bucks CEO  Olasukanmi Olaoye CEO, Auto Bucks Lenders Limited, one of the subsidiaries of Alert Group, in this interview with Hope Moses-Ashike, speaks on challenges facing lending to Small and Medium Enterprises (SMEs) and other issues, excerpt.   What specific risk management strategy did you implement to maintain portfolio at risk below 1 percent?   In our inaugural year of operation, we disbursed over N80 million in loans. The income generated from these disbursements, coupled with the fact that they constitute a healthy portfolio, mitigates any risk associated with our portfolio. Therefore, the revenue derived from fees and charges enables us to generate income without exposing our portfolio to risk. The robust health of these portfolios significantly contributes to the achievement of our income targets.  How did you manage costs and operational efficiency to achieve profitability within seven months?   To achieve profitability within seven months, we implemented several strategies. Firstly, we focused on securing cheaper funds, as lower financing costs enhance operational efficiency significantly. Secondly, while maintaining competitive pricing, we ensured that our rates were adequate to cover our cost of funds and other operational expenses.  Moreover, we kept our management expenses minimal, contributing to overall cost reduction. Leveraging technology was another key aspect of our approach. By deploying advanced technological solutions, we streamlined various business processes. For instance, our electronic collection system eliminated the need for manual cash transactions, enhancing efficiency and reducing the need for field officers.  Through these measures, we optimized operational efficiency and effectively managed costs, resulting in positive outcomes within the initial six months of operation.  You mentioned disbursing approximately N80 million; how many individuals or businesses were beneficiaries of this loan?  We exclusively focus on SME lending. To date, we have successfully disbursed loans to over 1,000 SMEs. This achievement underscores our deliberate commitment to positively impact the Nigerian economy through targeted support for SMEs. Since our inception, every loan disbursed has been directed towards SMEs, reaching a total of over 1,000 beneficiaries.  How do you ensure that the beneficiaries are utilizing the loans provided to them for business growth and to contribute to the economy?  The primary way we ascertain the proper utilization of the funds we disburse is through their repayment behavior. If beneficiaries have diverted the funds and not invested them in their businesses, it would reflect in their repayment patterns. Additionally, we implement rigorous monitoring mechanisms once the loan is disbursed. This ongoing monitoring allows us to assess the impact of the funds on their businesses and on the economy as a whole.  Furthermore, maintaining a positive credit appraisal is crucial. A strong credit record not only facilitates future loan requests but also enables beneficiaries to potentially access larger loan amounts. Therefore, we emphasize the importance of maintaining a favorable credit history.  When you mention that your portfolio at risk is below 1 percent, does that imply that you do not encounter other challenges?  The strategy we’ve employed acknowledges that some clients may face difficulties in repayment, particularly during certain business cycles such as festive or fasting periods. For instance, clients in the fast-moving consumer goods (FMCG) sector may experience reduced returns during fasting periods due to decreased consumption levels. Our proactive monitoring of these clients helps mitigate potential challenges and aids in the recovery of funds.  As previously mentioned, we exclusively provide loans to SMEs with a minimum of 12 months of consistent business operation and cash flow. This ensures that our borrowers have a track record of financial stability, as evidenced by their bank records. We do not extend loans to startups but rather focus on established businesses with a proven track record.  Our credit analysis process is thorough and detailed, assessing the borrower’s financial history and ability to repay. For instance, if a borrower has transacted less than N500 million in the past 12 months and seeks a N5 million loan, we evaluate their monthly turnover to ascertain their repayment capacity. This rigorous process ensures that loans are utilized effectively and that borrowers can comfortably meet repayment obligations.  Additionally, we implement regular monitoring to ensure that funds are used appropriately and not diverted for non-business purposes. We are mindful of seasonal factors, such as festive periods, to prevent misallocation of funds. Our commitment to responsible lending practices and diligent monitoring safeguards against potential diversions and ensures that our support truly benefits the MSMEs we serve.  What are some of the other challenges your business faces?  In the current macroeconomic landscape, businesses encounter various hurdles. The high cost of operation is a prominent issue, compounded by volatile market conditions. Fluctuations in prices, especially due to foreign exchange (FX) challenges, pose significant obstacles. Even after procuring goods, market dynamics can swiftly impact prices, leading to uncertainties.  Moreover, macroeconomic indicators like inflation rates, currently at 33.2 percent, further complicate business operations. Elevated inflation affects purchasing power and overall business viability. Additionally, the cost of funds presents a considerable challenge. While securing financing is crucial, prevailing market conditions have increased the cost of capital, with investors demanding higher returns on their investments.  Despite these challenges, we actively seek solutions to mitigate risks. This includes sourcing affordable and stable funding options while prioritizing long-term relationships with fund providers. We also recognize the importance of stable economic policies in fostering a conducive business environment. Efforts by the federal government and the Central Bank of Nigeria to stabilize the economy, particularly in areas like FX markets, are crucial for SMEs to plan and navigate business operations effectively.

The Chartered Institute of Bankers of Nigeria (CIBN) has signed a collaborative agreement with FinTechNGR and the Financial Services Innovators (FSI) on Fintech certification.

Under the agreement, Ken Opara, president and chairman of council, CIBN, said the three institutions have come together to award Fintech Certification which offers an excellent opportunity to bridge the tech talent gap and indeed further drive the implementation of the competency framework in the banking and finance industry in Nigeria.

He expressed the Institute’s indebtedness to the Bankers Committee and to the Central Bank of Nigeria for the Institute’s appointment as the accreditation agency for the implementation of the competency framework.

“We are not taking it for granted and are determined to make a success of the assignment which will lead not only to more knowledgeable professionals but improved service delivery,” he said.

Opara reiterated that the CIBN’s role is to be the bridge that will engender positive handshake among all the players (banks, fintechs, and other financial agents) in the financial services industry through capacity building programmes, training, content development, advocacy and sound corporate governance policies.

Speaking during the signing ceremony in Lagos and virtually, Seye Awojobi, registrar and chief executive of CIBN said, “This is a journey that started April 2017. That was when CIBN, the digital finance institute of Canada and the FinTech associate put together what they called FinTech Nigeria today.”

“It was the first FinTech conference in Africa that ushered in the 2017 world conference of banking institutes in Lagos when we brought all systems and FinTech operators and people in Nigeria together and I still give kudos to Segun Aina, who was the chairman.”

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He said it is a dream come true, and that it is the desire of the Institute to use technology to drive skills, to make a difference and that is where FinTechs groups come in.

“If you are not certified your knowledge is not acknowledged as such. So what we have done today is the beginning of life-long learning. Certification is a marriage of the one they dread a lot – FinTech group, which the banks dread a lot and without them the future is not certain,” he said.

Awojobi further said, “This is a journey that started April 2017. That was when CIBN, the digital finance institute of Canada and the FinTech associate put together what they called FinTech Nigeria today. It was the first FinTech conference in Africa that ushered in the 2017 world conference of banking institutes in Lagos when we brought all systems and Fintech operators and people in Nigeria together and I still give kudos to Segun Aina, who was the chairman.

Today, we are putting a point to the narrative that you cannot just be practicing but you can actually own a certificate in that regard and that is what is bringing this marriage.”

In his remarks, Ade Bajomo, president, FINTECH Nigeria, said, “It is a co-operation, it is a collaboration. We are going to co-exist together. FinTechs will get bigger and the banks will get bigger. FinTechs will disappear and some banks will disappear. So that is going to be the norm but those who will succeed are going to be those who can adapt very quickly. The two need to co-exist to create a better future and no country needs it better than us and to have that certification skills cannot only be good for FinTechs development or the development of financial services through banks but for our general ecosystem.”

“So I must say on behalf of FinTech Nigeria, 300 members we are extremely delighted to be part and parcel of this, to deepen the community, to deepen the ecosystem, to create talent that will grow our financial services environment both in Nigeria, Africa as we are seeing increasingly around the world,” he said.

Aituaz Kola-Oladejo, executive director FSI, in her remarks, said, “CIBN really is a forward-thinking institution. Today I will say history has been made, not just the signing of an agreement. This is going to shape FinTech businesses, not just in Nigeria but across Africa. I see more players coming out of this programme.”

Commenting on the official execution of the agreement, Uche Olowu, former president of CIBN, said, “Certification is the way to go. CIBN is going higher and we need to support that with programmes and certifications that are global and world class.”