Prince Austin Enajemo-Isire is the founder of DavoDani Microfinance Bank Limited. He said the microfinance banking industry in the country plays a crucial role in promoting financial inclusion by providing financial services to the underserved, the unbanked and those excluded from the financial services network, particularly those in rural areas and low-income individuals. But in this interview, the financial expert regrets that depositors put greater trust in the deposits in money banks and often exercise some elements of fear and lack of confidence in dealing with MFBs. Daniel Obi brings the excerpts…
“DDMFB is an active player and prominent in offering services such as savings accounts and credit facilities, which help the populace have access to and manage their finances, invest in their businesses, and mitigate risks.”
What is the core mission and vision of DavoDani Microfinance Bank? How do you aim to differentiate yourselves from other microfinance institutions in Nigeria?
DavoDani (DDMFB) Microfinance Bank, Lagos, is a state-licensed microfinance bank (MFB) currently operating from eleven (11) strategic business locations across Lagos state.
DDMFB, rebranded in 2022 with a new corporate identity, boasts of seasoned and distinguished professionals of diverse backgrounds who are renowned and well-experienced with different skill sets and competencies in the private and public sectors. The bank has a well-crafted vision and mission statement as its navigator.
Our Vision: To be an exceptional leader in the provision of microfinance and other financial services on a sustainable basis to assist our clients in achieving financial freedom.
Our Mission: An MFB founded on trust, integrity, and customer focus, aimed at empowering micro, small, and medium entrepreneurs through unhindered access to finance. This becomes a reality through our savings, loans, and financial literacy programmes aimed at helping individuals and small businesses in underserved communities to grow and thrive.
What differentiates DDMFB from others in the industry is rooted in our core values. At DDMFB, our core values of integrity, high ethical standards, reliability, and excellence are not just words on paper; they are demonstrated in our daily operations. These values distinguish us as an exceptional player and a leading MFB in Nigeria. Essentially, the bank differentiates itself from other microfinance banks through:
1. Offering tailored financial products that meet the specific needs of numerous customers, empowering micro, small, and medium businesses and education-based savings accounts.
2. Our robust digital platforms and mobile banking apps provide unhindered access to financial services by providing a user-friendly interface, offering a wide range of services, and ensuring security and privacy.
3. At DDMFB, we offer counselling to help our customers better understand financial products and how to use them effectively, which positively impacts loan repayments and long-term financial stability.
4. Above all, we provide face-to-face support, proper engagement, and relationship banking, which, according to our mission statement, builds trust in all areas of operations.
These and many more have helped us stand out in a competitive market and serve our target audience better.
How does DavoDani plan to contribute to the government’s financial inclusion goals?
The microfinance banking industry in the country plays a crucial role in promoting financial inclusion by providing financial services to the underserved, the unbanked, and those excluded from the financial services network, particularly those in rural areas and low-income individuals. DDMFB is an active player and prominent in offering services such as savings accounts and credit facilities, which help the populace have access to and manage their finances, invest in their businesses, and mitigate risks. To achieve the financial inclusion goals, microfinance banks have, over the past years, focused on increasing access to financial services for underserved populations. We have, on our part, continued to achieve this through our well-thought-out strategies, including the following:
(i)With our eleven branches established strategically in Lagos, the bank targets individuals and small businesses with limited access to traditional banking services. We have achieved a lot through our credit facility empowerment program for MSMEs, particularly in the Lagos market for women and SME customers. Our “SAVE & WIN” product has helped many customers to imbibe the culture of saving, which has recorded a large pool of people enjoying the product as of today.
(ii) Our risk assets portfolio, typically small loans granted to individuals and businesses, has grown tremendously. Many beneficiaries who could not qualify for traditional bank loans swim in joy with DDMFB services. We remain resolute in the bank’s entrepreneurial empowerment, which has helped promote economic growth at the medium and grassroots levels.
(iii) As part of our strategy to promote financial inclusion, DacavoDani has implemented digital banking platforms, including mobile banking apps and USSD services. These tools allow customers to perform financial transactions without the need to visit a branch, making banking more accessible from the comfort of customers’ homes or from any location without limitation.
(iv) The bank has also carefully established help desks to educate our customers on basic financial knowledge, savings, and managing credit, which is critical for building trust and encouraging the use of formal financial services.
(V) As a bank, we have since embraced the government’s social welfare program through corporate social responsibility programs. This has enabled us to contribute to Nigeria’s broader strategy to reduce poverty and stimulate economic growth.
What are the biggest challenges facing the microfinance industry in Nigeria today, and how is Davodani addressing them?
The microfinance industry in Nigeria faces several challenges. The challenges are in different forms, sizes, and dimensions, which include difficulties accessing enough liquidity to meet the demands for loans and banking transactions. As for us, we rely heavily on expensive deposits because depositors put greater trust in the deposits in money banks and often exercise some elements of fear and lack of confidence in dealing with MFBs, thereby making liquidity inflows difficult. However, to surmount this, we have diverse funding sources, including partnerships with our correspondent banks, development banks, institutional investors, and fixed depositors. We also rely on our digital lending platforms to enhance liquidity inflow. In addition, we have sharpened our retail savings products to increase deposits and encourage financial stability through our “save and win” and other savings products.
Another challenge is high default rates, which are serious for MFBs. We have even seen some customers with evil intentions to borrow but never to repay. In contrast, others believe Nigeria is owing, so they are justified in owing with an unwillingness to repay as soon as due. Managing credit risk in this regard is now very burdensome. However, our risk management criteria and financial literacy campaign have addressed these hurdles.
As the financial industry continues to grow and embrace fintech, many MFBs in Nigeria struggle with implementing and maintaining the technological infrastructure for digital banking, hindering growth and customer satisfaction.
DavoDani has been upgrading its technological infrastructure, including its mobile banking platforms, online loan applications, and digital payment solutions. By making banking more accessible through technology, we can improve customer service and expand their reach. Limited financial literacy among customers is another enormous challenge. Many Nigerians, particularly the underserved, lack the financial literacy to manage credit facilities and understand that the interest rate regime is a problem affecting their ability to make appropriate investment decisions. As mentioned above, we will continue to sustain financial literacy programmes to guide clients in saving, loans, and investing decisions. This helps us to build a more substantial, more informed customer base. Competition by so many MFBs vying for the same market share, especially in urban areas like Lagos, has posed unethical practices. It is not an easy task to be outstanding in a saturated market.
We at Davodani have continued to leverage our personalised services to build strong customer relationships and overcome these challenges.
How are entrepreneurs coping with the high interest rate environment and volatile Naira, and what are the economic implications?
Thank you for this question. Entrepreneurs in Nigeria today are facing unprecedented challenges, some of which are attributed to the high interest rate and volatile naira fluctuation caused by the floating of the naira. In the last 13 months, the Central Bank of Nigeria (CBN) has consistently hiked the monetary policy rate (MPR) six times to an all-time high of 27.5 percent and still counting. This impact makes borrowing more expensive, limiting entrepreneurs’ capacity to access credit facilities to finance expansion or working capital needs. For those with existing debt, high interest rates have led to high default rates and a serious squeeze on their limited cash flow.
The devaluation of the Naira seriously affects all businesses, particularly those that rely on imported raw materials, components, or equipment for their operations. What most entrepreneurs do today to sustain operations and efficiency is implement a serious cost control mechanism and efficiently deploy a committed workforce to maintain sustainable operations and profitability.
The implications of this on the economy are severe. Rather than the economy experiencing growth, what we see is contraction, with many organisations closing down operations or downsizing, which is further fuelling unemployment; food inflation is skyrocketing, available credit facilities have become more expensive, and generally, higher costs of doing business in the country are going out of reach of many entrepreneurs. We at DDMFB, like all patriotic Nigerians, are hopeful that the reform agenda of the present government yields fruits in the shortest future; we pray for it.
In what way have you supported businesses in this trying time?
DDMFB has been actively supporting businesses in the country, particularly in the Lagos environment, especially in the face of high interest rates, naira devaluation, and broader economic pressures. For instance, we have continued to provide support through our specific loan products to micro, small, and medium-sized enterprises (MSMEs) customers. We offer them financial freedom by giving them easily accessible financing options and simple requirements compared to deposit money banks. We are very close to our customers and charge a competitive interest rate that is not directly in response to the high MPR and interest rate on the spiral. Also, with our flexible repayment terms, DDMFB helps entrepreneurs navigate the harsh economic environment.
To cope with the situation, we have been offering short-term loans ranging from 90 to 360 days in tenor, designed to meet urgent working capital needs for our customers’ businesses so that they can stay afloat.
Another area where we have made a significant mark is in our investments in digital platforms to offer easier access to loans and banking services for small businesses. We have digital solutions that can help entrepreneurs maintain customer relationships and optimise operations with ease without a physical presence in our banking offices. We have been offering these and many more in these past ten years of our experience, guaranteeing our numerous customers unhindered access to finance at a time like this in our nation. We are a bank to beat.
What opportunities do you see for growth and expansion in the coming years? Are there any specific regions or market segments you are targeting?
DDMFB, like many financial institutions, has significant growth and expansion opportunities, especially in Nigeria’s evolving economy. We trust God that the current Renewed Hope Agenda of the current government will usher in the most expected good fruits and create a healthy enabling environment for businesses to thrive. With over 200 million people, Nigeria still has a large unbanked population, both in the urban and rural regions. We currently operate in Lagos State, and by focusing on reaching a larger population in our strategic locations in the state with our mobile banking services, micro-loans, and digital platforms, we are poised to expand our customer base and deepen our financial inclusion program. Also, opportunities exist by expanding into rural areas in the future, reducing geographical limitations, and fostering customer loyalty.
We intend to embark on a radical expansionary strategy and focus on providing tailored financial products for SMEs, including loans, savings, and business advisory services. The Board and Management have developed a medium-term strategic plan, which is aimed at evolving into the acquisition of a regional banking license. This will allow us to expand into the country’s neighbouring southwest region.
What are your long-term goals for DavoDani? How do you envision the Bank evolving in the next five years?
Thank you very much. In the next five years, my long-term goals for DDMFB would be to increase my focus on fostering financial inclusion, expanding customer reach, and driving technological innovation. We hope to evolve into a regional bank. Furthermore, I would like to see the bank grow its presence tremendously to serve the underserved and the unbanked through deliberate expansion programs and leveraging digital banking solutions. We will increase investment in digital infrastructure and implement mobile banking and online loan applications.
Above all, the Bank would also play a pivotal role in supporting the government’s sustainable development programs. In the next five years, we hope to double our efforts to support friendly social projects, including women’s empowerment and youth entrepreneurship, that will positively impact socio-economic development within our areas of operations.
How have the regulators of Nigeria spurred or marred the microfinance bank sector?
The Central Bank of Nigeria (CBN), the apex regulator of banks and other financial institutions, has implemented various policies to spur the growth of the microfinance bank sector. In recent years, it is on record that, among other actions, CBN has successfully approved a new capitalization regime for Microfinance Banks (MFBs). The aim is to strengthen the banks’ financial foundations and capacity to achieve set goals. Depending on their license classification, the policy increased the minimum capital requirements for MFBs. Tier 2 Unit MFBs require a minimum capital of N50 million, and N200 million for Tier 1; State MFBs require N1 billion, and National MFBs require N5 billion.
While this policy has presented challenges for smaller MFBs, it is expected to create a more stable environment and increase public confidence in the sector. The CBN has also restricted MFBs from engaging in foreign exchange transactions and high-risk businesses such as real estate by ensuring that they focus on their core mission of providing accessible financial services to underserved populations and promoting financial inclusion and stability.
In addition, the apex regulator drew up the regulatory framework in 2005, as amended to date, which provides guidelines for regulating and supervising MFBs. These measures, among many others, promote financial stability and increase access to financial services, particularly to the excluded unbanked in the economic system.
However, there is a constant need for adequate supervision and advisory oversight to minimise or prevent the incidence of having to cancel the banking licenses of ailing banks. CBN should consider bailouts for the sector in distress affecting some MFBs, as was done for some commercial banks in the past, to avoid distortion and panic in that sector. In addition, the CBN’s persuasion encouraging MFIs and MFBs to lend to the underserved and promote entrepreneurship has contributed to the industry’s growth, helping small businesses and individuals in rural areas access credit.
While regulators have faced challenges in balancing stability with financial inclusion, their efforts have contributed to the growth and development of the microfinance bank sector in Nigeria.
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