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CIBN proposed banking school to offer job opportunities

April 26, 2023

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.

Ken Opara, President and Chairman of Council, CIBN

The Chartered Institute of Bankers of Nigeria (CIBN), is making plans to establish a banking school, which would offer job opportunities to the teaming unemployed youth in the country.

The proposed school aims to train and equip graduates to become employable in the banking, finance and business industry.

Ken Opara, president/Chairman of Council, CIBN, said this during the ground-breaking ceremony of a 160-seater auditorium, named ‘CIBN Bankers Hall’, at Nnamdi Azikiwe University (NAU), Awka, recently.

“Plans are underway to establish a Banking school in Nigeria. As soon as a student who has undergone the CIBN linkage programme graduates and finishes the National Youth Service Corps programme, he will be given the privilege to attend the banking school at no cost,” he said.

Speaking further, he said, “you will be trained and made ready for employment in banks and other financial institutions. Banks have also agreed that the banking school will become a pool where they will be recruiting young bankers.”

Charles Esimone, Vice-Chancellor of NAU, said that the university placed high premium on collaboration with industry to produce graduates with competence and skills needed in the labour market.

He appreciated CIBN for providing the needed support through endowment projects.

Read also: What customers can do to reclaim their money in dormant account

Esimone said there is a need to deepen this beneficially mutual collaboration between CIBN and NAU, adding that the hall will be an environment for credible global research to help the institution fulfill its mandate.

He said the CIBN Linkage programme which was initiated in 1998 in collaboration with 76 tertiary institutions in Nigeria, had continued to transform and change the narrative of banking education.

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Opara noted that the Linkage Programme which commenced at NAU in 2008, deepened banking, finance and allied programmes through infusion of professional elements in the teaching and learning processes.

According to him, the linkage programme is also addressing the gap between the industry and academia in terms of quality graduates produced from higher institutions.

“The Nnamdi Azikiwe University emerged one of the best linkage programme institutions for creating value and building capacity. Hence, the donation of the 160-seating capacity lecture hall.

“The CIBN Bankers Hall for students of the department of Banking and Finance, is a legacy project bequeathed to NAU and will be delivered in four months.

“The hall will be a smart resource centre, fully furnished and equipped with ultra-modern and digital facilities for the training and development of future-ready bankers.

“This project is the institute’s modest contribution toward the promotion of banking and finance education in the country,” Opara said.

In his remarks, Pius Okoye, Dean, Faculty of Management Sciences, NAU, said the faculty had benefited from CIBN in forms of exposure for banking and finance students.

He said that the CIBN linkage programme created an opportunity for students who want to pursue their academic studies concurrently with their professional banking certification.

“We pledge that the CIBN Bankers hall, shall on completion, be put to good use and we will maintain it for the development of banking experiences,” Oko said.

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