Macro-Concerns about Micro-Finance Brands!
By Tomi Ogunlesi
Suddenly it seemed to have become the 'next-rated' hotspot in the financial services industry, as it fast became the toast of government, regulators as well as multilateral bodies such as the World Bank and IMF (who were willing to advance take-off grants to the 'convincing' ones. Even, top executives of commercial banks were seen resigning from their perked positions in droves to float/manage microfinance outfits. Enter the financial whizkids, purportedly here to empower the poor and down-trodden, while changing the face of the sector for good. In concert, with the well-intended efforts of the regulatory watchdogs i.e. CBN and NDIC, the death knell had effectively been sounded for those humble concerns cherished by the masses and known as 'community' banks and voila...the entire landscape rapidly became dotted with fledgling microfinance outfits!
I'm no banker, but from a carefully situated personal perspective, my opinion is that our microfinance bankers started out with commendable vision and ideals but apparently got it twisted somewhere along the line. (I actually stand to be corrected on this, as it represents a purely individual assessment of the dynamics of this sector).
Let us briefly cast our minds back to the very beginning. Decades ago, Mohammed Yunus described his search for new bank clients as a process of "looking for the most timid." He wasn't looking for the villagers who were the first to step forward to ask for a micro-loan starting at less than $10, he was looking for those who were last to come forward and who trusted their abilities the least. To those villagers, he and his staff would say, "Yes you can."
He was so shaken by the sight of people dying of starvation that when he set foot in Jobra, the Pakistani village next to his campus, all he wanted to do was to see if he could be of use to one person for one day - not 40 million, just one.
It was in that village that he met a stool-maker who horrified him when she explained that she earned only 2 cents a day for her beautiful craftsmanship. With no money to buy the bamboo she needed, Sufia Khatun was forced to borrow from a moneylender who demanded that she sell her finished stools back to him at a price he set - a price so low that she made only 2 cents a day profit.
When he asked whether she could earn more if she was freed from the moneylender, she told him, "Yes I can." Professor Yunus had a student look for other villagers who were in the same dilemma. The student found 42 people, who needed a grand total of $27 to pay off the moneylender, buy their raw materials and sell their wares to the highest bidder. That's right: all they needed was an average of 68 cents each. With her loan of less than $1 the stool-maker's profits soared from 2 cents a day to $1.25 a day.
Thirty-three years later, nearly eight million members of Grameen Bank (a total of 40 million when you count their family members) are saying "yes we can" to the whole world. Since its inception, Grameen Bank has lent more than $8 billion to the poor in Bangladesh.
On the contrary, my guess is that, its counterparts in Nigeria were working at cross-purposes to the very ideals they were set up for. By omission (or commission!), a vast majority of them out-rightly ditched their callings and embarked on a collision course (howbeit expressly doomed to accelerated failure) with the consolidated megabanks (especially in Lagos). With the new awakening to 'branding' and the limitless possibilities it offered, alongside their new and intricate logos and corporate outlooks came the prestigious corporate head offices and branches, ostentatious fleets of automobiles etc, most of these acquired with the hard-earned resources of depositors. At some point, they became virtually indistinguishable from commercial banks in outlook. It was even reported that some of the microfinance institutions charged interest rates as high as 100% for lending and paid as low as 5% on savings-all of which leads to the logical and fundamental question of who their target market was intended to be, in the first place.
Now, in putting this into proper perspective in the Nigerian microfinance context, the existing microfinance framework in Nigeria serves less than 1 million people out of 40 million being the potential number that need the service. Also, the aggregate micro credit facilities in Nigeria account for about 0.2 percent of the GDP and is less than one percent of total credit in the economy. Addressing this situation inadequately would further accentuate the problem and slow down growth and development of the country.
I am not oblivious of the fact that the pervading opinion about the downward spiral in the microfinance landscape is an eventuality that cannot be divorced from the current outlook of the commercial banking sector. This is not entirely false. The NDIC, as a matter of fact has finally sounded the alarm by admitting that the nation's microfinance sector is disintegrating at a precipitous rate. I believe, most Nigerians are already aware of this. (Of about five microfinance banks along the street where I work, at least four are under (pad) lock and key as we speak!. Out of the 900 MFBs in the country, only about 200 are believed to still retain some semblance of functionality. In fact, a top official of the NDIC lamented recently that a genuine effort to cleanse the system should see at least 600 microfinance banks being de-registered.
All of these again only go to underscore the fact that, no meaningful branding or communication effort can be embarked upon devoid of a sound and carefully articulated business model, which incorporates a clear understanding of the operating terrain and expectations. Branding is beyond logos, pay-offs and psychological/emotional manipulation to suit people's expectations. There is a functional aspect to it, which necessitates that those desires and expectations are met satisfactorily or better still, even exceeded. As it's said, the best way to expressly kill a bad product is to advertise (or better still, 'brand') it
It was at the point when micro finance entrepreneurs began to think it was another platform to make brisk business that they got it wrong. Nobody patronizes a brand that lacks the intrinsic values that align with its external values. When a brand delivers its promise, it benefits from the virtue of repeat purchase or repeat patronage, which actually becomes the engine room of the brand's growth and expansion. Unfortunately, in Nigeria much unlike in Mohammed Yunus's Bangladesh, the motivation is always self and not to help the needy.
We can only earnestly hope that the regulators and other concerned/relevant stakeholders get their game right in forestalling a further deterioration of what is clearly an already precarious situation.
Tomi Ogunlesi, is an account planner in Strategy and Business Development at BatesCosse, Lagos.
