KAFILAT ARAOYE is the pioneer managing director/CEO of LOTUS Bank, the latest non-interest bank in Nigeria. In this exclusive interview with a BusinessDay team led by BASHIR IBRAHIM HASSAN, General Manager, Northern Operations, Araoye reveals the potential of non-interest banking to boost trade and drive the economy.
What unique value is LOTUS Bank bringing to the market?
From my experience working in a then startup (Guaranty Trust Bank), I learnt how to make a difference in the banking industry by simply looking at people’s pain-points and how to address them.. When my banking career began, turnaround time for simple transactions in the banking hall was between two and three hours, but after we improved processes, our turnaround time reduced to five to 10 minutes. This is the experience we are bringing into Non-Interest Banking, although Non-Interest Banking is new in Nigeria. As an alternative to conventional banking, we should be able to compete favourably in the banking space, as a credible alternative to conventional banking. And part of being a credible alternative to them is bringing solutions that are ethical and disruptive. I can’t share those with you because it’s part of our strategy, but you will see the difference as we go along.
You would have seen our mini centrer at Oshodi interchange. It’s a container but we’ve turned it around into a Digital Service Centre (DSC). It’s the first of its kind in Nigeria, because when we put it up, no other bank had anything like that. Everything is digital. If you want to do transfers there is a table called the “Genius Table”, and we have the tablets through which you will do the transactions. When you go into our branches today (to transact business), it’s paperless — you do not have to fill paper form to go across the counter; you go to the tablets and make the request for withdrawal. The process gives you a number; you go across the counter and get your money. If you don’t need cash, you just go in and check your balance, do your transfers and you go out. That’s what that DSC is about – digital service. There is no teller point there and there are four ATMs. We also have a replica of that at Agege and Orchid Road (Lekki) today.
Averagely, not less than 1,500 people go to the one at Oshodi daily to withdraw money. So, that’s just a tip of the iceberg. We will be studying the ecosystem to bring up solutions that will address pain-points and also address the issues around the underbanked, not just the unbanked. We want to go closer to the grassroots. We are available for everybody, to make banking easy for everyone to relate with.
We started operations on July 7th this year. This will make our fourth month, but it is almost like we have been here longer. And we have 10 footprints as we speak in the three months. We are in Oshodi like I mentioned earlier. We have full branches on Allen Avenue, in Computer Village, on Lagos Road in Ikorodu, Idumagbo, and AdetokunboAdemola Crescent in Abuja. Of course, our temporary Head Office is on Victoria Island (with a full branch). We have an ATM gallery in Yaba and we are about to open in Abeokuta (Ogun state) this November. We will also be in Iyana Ipajaand Ilorin (Kwara State) before the end of the year.
What is your vision for the bank in the next three to five years?
Definitely to be the number one non-interest bank in Nigeria, but my vision for serving the people is introducing at all times innovative solutions that will help advance business and mostly digital solutions that will help advance our stakeholders, being an enabler of business. If you observe today, as you are passing by our stand, you’ll see a sign that says “Scan and open an account.” It’s just one of our teasers.
If I’m to tell somebody who wants to bank with a non-interest bank, what do I tell them in few words that best captures your services compared to others?
It’s digital banking, solution providing, customer friendly and most importantly partnering. Partnering is the core of what we do. We partner, we progress with you and prosper with you. So our mantra is partner, progress, prosper — the three Ps that lead to a win-win.
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Let’s look at the tough operating environment. When the first non-interest bank came on, it took them a very long time to settle and even make profit. How big do you see the size of the market that you want to capture?
The truth is that we are not just looking at the size of the Islamic banking market. It goes beyond that, because when you talk about the economy, there is no religion in it. Money is agnostic. You will be shocked that our first deposit came from a Christian corporate entity. What is really critical is what we want to put on the table.
The demands of people are not so deep. All they want is understanding. If you can empathise with them, show that it is a win-win situation, and you truly proffer solutions to their problems by structuring transactions that will solve their needs, you will be their first port of call. For every transaction, they will have to come to you.
Number two is that you provide service solutions that cross geography, because anything that is automated crosses geography. You can see how the Fintechs are doing. Everything they do we can do, but they don’t have a vault, so they can’t take in money. They can’t open letters of credit because they don’t have the trade licence. So we have all those, including FX licence, which they don’t have, plus the ability to do the payments that they do, and we can do agency banking. We can reach the grassroots. Then why wouldn’t we grow.
We have learnt some lessons through the first non-interest banks, and we must appreciate that. We are going to marry some of the experiences we had working in the conventional bank and seeing what the customers want. Once you understand your customer, and know their needs, and you can fit products to address people’s needs, the sky is the limit.
In a population of almost 200 million people, the opportunities are enormous. You’ve seen what has happened to the telecoms industry. They never dreamt of what they are getting now. That’s what population does if you channel those energies in the right place.
Our first customer was a non-Muslim and our first risk-financing customer is a non-Muslim. What this means is that we are educating people, letting them know that it is simply banking
How do you intend to expand operations to non-Muslims?
Like I said, our first customer was a non-Muslim and our first risk-financing customer is a non-Muslim. What this means is that we are educating people, letting them know that it is simply banking. Part of what we are educating them on is that of the top 20 countries for Islamic banking, eight are non-Muslim countries. The UK and US are there. In fact, the US is the largest consumer of non-interest banking.
In the UK, for instance, 80 percent of non-interest bank mortgage goes to non-Muslims. That tells you that there are no barriers in the business. Once people see that it is fair business that can meet their needs and fund them transparently, they will come. All you need to do is educate, and market them. When they come in, they will see there is nothing to it, other than the fact that you are operating under Sharia guided principles which are fair and positive.
Look at equity, justice and fairness. Why wouldn’t anybody want to embrace it? It’s a common denominator in any place. Non-interest banking is found in the Bible. We are not saying money should not be made off financial intermediation. We are only saying, fund the real sector, and do it in a fair and transparent way. Also, structure transactions to suit the lending.
From research, we found that there are lots of Igbo customers in the other non-interest banks who want to trade. Islamic banking is asset-backed and risk-sharing. Supporting trade is number one. If you compare conventional and the non-interest banking, you will see that non-interest banking supports trade more than conventional banking, because every transaction must be asset-backed. I cannot give you money as money. In non-interest banking, money is not treated as a commodity, it is just a means of exchange. That’s the difference between us and a conventional bank.
What are the challenges you foresee for the bank, in terms of capital, manpower and operating environment?
This is a new area, so we have to do a lot of capacity building to ensure that our staff are up to speed in the knowledge of Islamic financing, which we did as soon as we started,
The other challenges we face, as any Nigerian doing business in Nigeria, are ethical issues. We must maintain ethics. Integrity is key for us, and you know the way Nigeria is, with all the indiscipline in the system.
How happy are you with the success so far, even if it’s just four months?
It has been a bit tough, but I am used to that, because like I said, I was a pioneer staff of a conventional bank. One of the tough issues is the people — getting people who appreciate the need for discipline, focus, and professionalism. There is joy in me when I see those who buy in and when the desired culture is being institutionalized, and is evolving gradually. It’s not been easy, but like I told you, it has also been rewarding. We have done 10 branches and have been able to brand ourselves to the point where people tell us they love what we are doing and give us billboards for free.
What legacy would you like to leave?
All I want people to say is what has been said when I left Guaranty Trust Bank in 2015. The ovation was very loud. What I want to be said is that I helped to grow the economy. I helped to grow the real sector and to put Nigeria where it should be – not just to be an emerging market, but a market to be reckoned with. It is about encouraging people to do things ethically. Even with this banking, you can make money and grow the real sector. That’s the legacy I would like to leave.
