Wednesday, August 26, 2020 / 12:19 PM /
Nifemi Taiyese for Proshare WebTV / Header Image Credit: WebTVNG
Stakeholders have outlined key steps that Microfinance institutions should take in achieving scale in their operations across Nigeria.
This was part of the highlights of the Accion Microfinance bank webinar held recently that discussed the theme "Overcoming the Liquidity Challenge: Debt Funding and Capital Raising for MFIs".
ÂÂGiving the opening remarks, Mr. Taiwo Joda, MD/CEO Accion MfB said there was a need for MFIs to come out from the COVID-19 pandemic stronger, in terms of operations and efficiency.
The MD/CEO of Accion MfB also said the Webinar would address issues around improving liquidity and meeting minimum capital requirements.
Mr. Adegoke Adegbami, the MD/CEO of Mainstreet Microfinance Bank, the moderator of the Accion MFB Konnect webinar, stated that the topic was coming at the right time with subject matter experts giving their views on the matter.
Adegoke was of the view that MFIs need to position and brand themselves properly. According to him "Part of the problems confronting MFIs is that they have not been scaling. Scaling is good for MFIs as an industry to be able to attract human, material and financial resources".
On his part Mr. Bonaventure Okhaimo chief Operating Officer Development Bank of Nigeria in his presentation on "Overcoming the Liquidity Challenge: Debt Funding and Capital Raising for MFIs" highlighted the major challenges MFIs face in accessing debt funding, the DBN Experience as it covers 6 major parts;
Speaking further he said the DBN has three mandates in promoting access to finance for MSMEs; Lending, Risk sharing and Technical Assistance through capacity building at management and staff level.
Mr. Bonaventure Okhaimo Chief Operating Officer, Development Bank of Nigeria giving his presentation on Overcoming the Liquidity Challenge: Debt Funding and Capital Raising for MFIs.
In his presentation, Bonaventure highlighted debt funding, grants, equity and angel funds. Bonaventure said it was important for MFIs to improve their financial performance by seeing the pandemic as an opportunity for them to develop their product offerings as there is a limit on the variety of products that can be offered.
The competition in terms of branding for commercial banks and MFBs are not at the same level.
Providing further insight, Bonaventure was of the view that MFIs need to leverage digital technology properly to put their products in the mind of the public as digital technology becomes cheaper than other obvious branding strategies.
Looking at the factors to be considered in pricing debt securities, Bonaventure said it is important to examine the risk through eliminatory criteria and due diligence and also for the operator to take a look at what is happening in the market to determine the interest that will be given.
The most important factor for debt companies to consider in granting loans to companies is Character which can be found in historical performance and corporate governance.
For him, some institutional depositors are willing to forgo better interests because of the issue of perceived risks attached to MFBs. The nature of operations is very important for MfBs to change the perceptions that microfinance institutions are of high risk. It is also a period for MfBs to revamp their processes and work on their systems.
Mr. Oluwaseun Olatidoye representing Mr. Afolabi Olorede Head, Coverage and Corporate Banking, FBNQuest Merchant Bank in his remarks identified the critical success factors for MFIs in accessing funding.
Olatidoye believed some MFIs do not understand the critical need of getting an investment-grade rating.
"A lot of MFIs are not creating awareness to the capital market community on their products".
He advised MFIs on the need to have improved investor engagement through conscious efforts.
Assessing developments in the capital market, he noted that in the last one year over N600bn has been raised, but decried the fact that only one percent of MFIs constituted that price.
He called for significant improvement from MFIs in their activities, especially branding and also harped on the need for them to access the capital market, through periodic roadshows.
For him, the benchmark for pricing debt securities is the FGN Bonds, the benchmark rate has been single digit which is a perfect opportunity for those MFIs that want to come into the market.
According to him, the following factors are what capital market operators consider when investing in MFIs;
Olatidoye advising MFIs on what loan providers consider in providing funds noted the following steps;
"For the local markets, there are some rating agencies with very rich knowledge of the local markets that have developed experience/expertise over several years. There are some international funds, that can sponsor credit ratings for MFIs and the most important thing is for MFIs to access them" He said.