Recently, banks were churning out profits. How sustainable is this, given that they did so post-Soludo consolidation era?
The profit generated by Nigerian banks cannot be viewed as sustainable at the moment. Sustainability can be viewed from various facets. Sustainability is longevity. You can be sustainable if you are able to remain consistent on whatever model you operate. You can be sustainable if whatever style of operation impacts positively on the beneficiaries. Banks are accustomed to posting unrealistic profits while businesses suffer.
Is the economy sustainable? Are small and growing businesses thriving? Are banks lending? How do they even generate the profits? We have had situations where a profitable bank got liquidated after series of bad loans. Some of the failed banks were profitable but illiquid. How can you be sustainable when you are not operating within the objects of your establishment in the first place? There are the reasons the CBN recently established The Nigerian Sustainable Banking Principles (NSBP), which is focused on developing the working environment of the banks as well as improve on their profitability.
Adoption of the principles will not help banks in mitigating the environment and risks associated with their business operations and those of their clients, but also help them to achieve greater efficiencies and better position them to take advantage of opportunities in the global marketplace where environmental and social issues are becoming increasingly important. They will also enjoy higher productivity, higher staff morale, higher turnover and absenteeism due to strong employee relations and workplace practices. The CBN would need to provide the structural mechanism to encourage consistent and widespread implementation of the principles and develop its institutional capacity to support the banks in their implementation of the principles.
NSBP had been developed by the Banker’s Committee to drive long-term sustainable growth while focusing on development priorities, safeguarding the environment and our people, and delivering measurable benefits to society and the real economy. The NSBP is hinged on nine over-arching principles, which include managing environmental and social risk in business decisions; managing the bank’s own environment and social footprint; safeguarding human rights; meeting the imperatives for good governance, transparency and accountability.
The principles also focus on promoting women’s economic participation/empowerment as well as financial inclusion of communities and groups with limited or no access to the formal financial sector, supporting capacity building in the sector; promoting collaborative partnership to accelerate sector progress and reporting to take stock of sector progress and attendant needs.
While the first four principles would keep the banks socially responsible, the last five would no doubt improve the reach and profitability as banks drive towards green areas of the market. The NSBP aims at minimising or mitigating the negative impacts of financial institutions’ operations on the environment and local communities in which they operate with focus on agric, power and the oil and gas sectors.
How would you describe your operational profile (your company)
RegCharles Finance and Capital Limited is a non-banking financial institution licensed by the CBN to provide investment management service, credit service, debt and equity solutions and financial and business advisory service.
At RegCharles Finance, we focus on financing and empowering:
• Micro, Small and Medium Scale Enterprised in various of the Nigerian economy
• Agrculture and Agro Allied Businesses in Nigeria
The firm is renowned for its social and impact investment capacity focusing on Micro, Small and Medium Scale Enterprises. In this, we assess the social, economic and environment impact of transactions and investments before funding any business. By providing tailored financial solutions and advisory services through our array of products and services, our target focus is:
At RegCharles, we utilize the models of Lending (Debts), Mezzanine (Micro equity and Loans) as well as Financial Advisory Services in serving our clients depending on the peculiarity of the transaction. RegCharles focuses mainly on those businesses from the bottom of the pyramid to the middle which are always neglected by banks and other financial institutions due to issue of collateral and structures. we provide the platform to structure these companies and position them for funding after a series of capacity development programs.
We also provide fund management services for individual, private and institutional investors, offering a fair return on investment while availing them the opportunity to impact their societies and environments by investing in under-invested sectors of the economy.
To further buttress our commitment to social and impact investing model, RegCharles Finance is a member of two renowned Networks of Social Entrepreneurs Aspen Network of Development Entrepreneurs (ANDE) and Global Impact Investment Network (GIIN). Recently, we were inducted into British Council for Africa, United Kingdom (BCA) in order to form allegiance with the institution in promoting and supporting MSMEs in Africa through financing and advisory services. To measure our performances in this regard, we abide by the Impact Reporting and Investment Standards (IRIS) and Global Impact Investment Reporting Standards (GIIS) and RegCharles Finance and Capital Ltd is a signatory to the United Nation Principles of Responsible Investments (UNPRI).
What is your take on CBN’s tight monetary stance for over 15 months now?
The monetary policy rate (MPR) has been viewed as being on the high side. No doubt about that. However, the apex regulatory body has justifications for this in the best interest of the country, owing to the recent global economic challenges.
But the fact remains that there are better ways of achieving positive outcomes compared to MPR, I am of the opinion that MPR should be eased. Apex body should be innovative in this aspect by establishing structures that will encourage fiscal retrenchment and structural adjustment rather than relying heavily on MPR. This further challenges banks and other financial institutions to be more innovative with their product designs so as to attract funds from the grass roots. I believe CBN is applying this MPR method for the short term.
How has this impacted banks lending generally?
Bank lending (although they never lend) has been on the decline since the MPR was increased. Banks choose to invest in other financial instruments in order to avoid risks associated with lending to businesses at this time. Bank lending is reduced and business are suffering. Banks have declined financial assistance to the banking public. The developmental roles of banks at the moment have been eroded.
How is your company positioned to contribute meaningfully to the economy?
At RegCharles Finance, we focus on financing and empowering Micro, Small and Medium Scale Enterprises in various sectors of the Nigerian economy; Agriculture and Agro Allied Businesses in Nigeria.
Till date, RegCharles Finance has finance over 400 MSMEs in Nigeria in various sectors within nine month of acquisition and restructuring. Our total investments and loans have exceeded N350m. We intend to impact 1000 MSME more before the end of 2013. Our target investment should be within N1 billion to N1.5 billion by that time.
Ours is a social and Impact investment Finance Company targeting to make great impact in micro, small, medium and growing businesses in Nigeria. The hunger to inculcate and catalyse entrepreneurship as a source of reducing unemployment has attracted the attention of International communities on our businesses and the model.
We focus on the bottom of the pyramid to the middle in order to ensure financial inclusion of those neglected by the usual banking models in the country. We incubate businesses and nurture them to growth. By relying on borrowings and shareholder’s funds, we have been able to add values to the Nigerian economy in the following manners:
• More than 100 female entrepreneurs have been financed and incubated to growth by our model.
• We have a youth program targeted at fresh graduates aimed at ensuring sustainable entrepreneurship among them.
• By impacting positively on these businesses, we have been able to generate employment of over 500 people nine graduates and unskilled labour)
• Our focus on Agric and Export businesses is the driving force behind our focus as we intend to fund mechanised farming for more than 500 farmers.
We currently have financing requests from MSMEs in excess of N2b but have been unable to discharge them due to fund paucity. We wish to seek the support of those that believe in our strengths to generated and deploy funds to us which will help catalyse the economy and foster growth across sectors. The fund providers ultimate will receive the competitive returns expected if they invest in our products.
What do you think is the net effect of double-digit inflation on the real sector?
It is a known fact that the double-digit monetary policy rate is in the short term unfavourable to the real sector of the country. Meaning that the high the MPR, the higher the cost of borrowing from commercial banks by businesses and individuals. The lack of access to funds/credit facilities ultimately leads to dearth of businesses with major impact on small and growing businesses.
Despite this, we are seeing the positive effect of this on the nation’s inflation rate (currently at 9.5%) which will positively affect business in the long run.
Do you think we are really ready for the IFRS?
The issue of Nigeria’s readiness in adopting the IFRS is definitely a relevant one. The nation cannot continued to remain in isolation as regarding such issues hence, it is necessary that we adopt the IFRS. Granted, the IFRS will expose our loopholes, which most Nigerians will not eagerly embrace, but I believe that over time, it will become acceptable, in the long run that is. Most organisations are slowly to adopting the IFRS, undergoing training here and there, so I believe we are not quite there but we are on the way. In fact, I believe that in the next few years (say 5-10); the IFRS would have been fully entrenched into our systems.
What role will the IFRS play in fighting corruption and boosting tax revenue for government?
The adoption of IFRS (at all levels i.e. organisations and governments) no doubt will of course expose all loopholes, including tax defaulters, evaders, etc. The IFRS mandates that all entities report their audited accounts in a specific format from which it can be easily depicted, whether there have been violations or not; this would be a major tool to ensure transparency. Millions of naira are being lost yearly as a result of lack of a well-structured system to ensure tax reporting, I believe the IFRS would ensure that.
Steve Omanufeme, News Editor,