CHALLENGES OF MARKETING AND FUNDS MOBILIZATION IN MICROFINANCE BANKING BUSINESS

Presented to Participants at the Workshop on Fund Sourcing and Management In Microfinance Bank in Nigeria
By IFEOMA C ANA(FCIB, ACA,ACIP) (MD/CEO Elim Microfinance Bank)

Program objective
At the end of this program, participants should be able to: Underscore the main sources of funding for microfinance banking in Nigeria Appreciate why they have problems/challenges in obtaining appropriate funding for their institutions Decipher ways of overcoming the challenges and become effectively and adequately funded for their banks

DEFINITION OF KEY WORDS

Marketing

for Funds This may be defined as all those efforts to reach the targeted audience for different types of funding for microfinance banking operations Funds funds, money immediately available for business and expected funds due but not immediately available; Challenges something that by its nature or character serves as a call to battle, contest, special effort

PREAMBLES
From the program sub-themes, you have already discussed the veritable sources of funds for microfinance banking. I therefore believe that you have covered these key sources Equity funds Quasi equity convertible loans or equity Loan funds-Long and short term Microfinance development funds local and international Deposit liabilities Other liabilities/assets funds

BRIEF HISTOLOGY (Discussory)

Microfinance

banking policy in Nigeria (the minimum capital issue) Promoters expectations Federal government pronouncements CBN moderating roles State governments intervention The Smieies funds

NIGERIAN PERCULIARITY
Inability

to match action with words The bureaucratic slow downs in policy implementations Personal interests over shadow national goals Insincerity of the leaders Corruption at every level Mediocrity that undermines professionalism Lack of will to legislate conceived good policies

THE CHALLENGES
To enable us understand the challenges, it was important for us to be refreshed with the foregone slides which are indeed our backgrounds. In the following slides, we shall be looking at the challenges in obtaining adequate funding for MFB operations from the main sources of funding

Five main categories of Funds mobilization challenges

Equity

and Quasi Equity mobilization challenges Development funds mobilization challenges Deposit mobilization challenges Personnel challenges for funds mobilization Assets conversion-the profitability and profit retention angle

EQUITY AND QUASI EQUITY CHALLENGES

Nigerians are too short sighted in investment decisions. They would not invest except they can turn around their investment in a very short period. The Elitist attitude of most Nigerians;- Hardly would any investor think about empowering the poor even the poor themselves would rather invest in mega banks than in micro banks.

Level of illiteracy even among the educated regarding poverty alleviation and the social effects in the country.

Equity and quasi equity challenges contd

The

master-beggar perpetuating mentality that leads to pursuance for charity among the citizenry rather than empowerment.

Deposits

into microfinance banks when they come are so meager they are hardly enough to take care of the huge challenges of poverty alleviation/small-medium scale entrepreneurship lending quests in Nigeria. Regulatory actions such as; investors may not borrow to invest in microfinance banks

DEVELOPMENT FUNDS CHALLENGES

Poor

buy-in to poverty alleviation by the leaders at Federal, State and local governments as well as industry leaders in Nigeria Lack of and inability to mobilize development funds for micro financing and grass root development by the government and regulators Greed that leads to cornering International development agencies funds by various governments, mega banks and HNIs who operate as NGOs with no intention of deploying such funds for poverty alleviation and grass root developments

Development funding challenges contd.

Corruption

ridden society that results in 1000s of NGOs evolving without any form of regulation to fraudulently obtain international and even local development funds which end up in private pockets Lack of accountability leading to non repeat feat by international development agencies and societies Very poor infrastructure frustrates any real move in development funds deployment as projects genuinely fail from poor performances due to poor facilities and infrastructure

DEPOSIT MOBILIZATION CHALLENGES

Undue

competitive play field from mega banks created by the CBN De-marketing effects of pronouncements by the press and even the regulators Past history of Nigerian banking particularly the magic banks and community banks Unprofessional and unethical practices of microfinance banks opearators

Deposit mobilization challenges contd.

Elitists

attitudes of Nigerians make them shun deposits/relationships with microfinance banks Even the poor would rather deposit with mega banks rather than MFBs unless where mega banks do not exists The borrowers from MFBs make deposits with mega banks Where deposits are made, only insignificant amounts go to MFBs Fraudulent activities of operators-funds diversionary that MFBs are compelled to pay back

PERSONNEL AND COST CHALLENGES

The board are in the main unschooled and not people who have the clout to command equity or development funds. Management normally do not have much influence on major investible funds owners and principally intimidated when competing with equity and liability funds with commercial bankers. Staff generally are highly inexperienced and they are no competition for the confident and well trained commercial banks staff in deposit drives.

Personnel and Cost challenges contd

The

quest for capital may turn out quite expensive e.g. private placement costs (legal, CAC and Accounting cost) as well as cost of term deposits costs and kick backs by government may not be within the reach of microfinance banks for government and development funding. costs and training costs may be quite high for most microfinance banks to accommodate.

Bureaucracy

Publicity

ASSETS CONVERSION CHALLENGES

High bad loans crystallize working capital Outright fraudulent loans internally or externally

instigated Insider abuses Mfbs are unable to recycle loans and earn more incomes. This has great negative impact on funds availability in the banks Non retention of profits erodes working capital Bad loans lead to failures with the ripple effects of Depositors shunning the mfbs Investors not feeling safe to invest A run created on the banks by massive withdrawal of deposits

Ways to Overcoming challenges

Indeed overcoming challenges in adequate microfinance banks funding are both intrinsic and extrinsic Lets us look at the intrinsic ones as the external challenges may not be within the immediate influence of the operators and owners to overcome

Overcoming challenges-the internal solutions to inadequate funding

Begin

o o o o o

with the end in mind. What type of MFB do we want to be, at what level do we want to play irrespective of what competition is doing and what the regulators expect. Beginning with the end in mind enables the promoters to determine: Infrastructural requirements Level, profile and number of staff Location of business Clientele base of the MFB Types, volumes of assets and liabilities to be involved in

Overcoming internal challenges contd.

Having

begun with the end in mind, ensure adequate capitalization from inception without hopes for any external funding except for prudent plans for deposits liabilities Ensure that board members are people of integrity and commitment who have passion to ensure the bank succeeds and would take step to back the bank to success Structure activities and operations to fit into assured funding Ensure liquidity of loans and advances

Overcoming internal challenges contd.

Decide

to be financially frugal about expenses Seek every opportunity of external funding without planning on it Be very flexible in operations Have a good market share in area of operation Ensure good training of staff and staff motivation so as to avoid frauds Have a good internal control in place to avoid lakages

WAYS TO OVERCOME EXTERNAL FUNDING SOURCES

Developed

products that appeal to the target funding bodies Develop attractive and distinctive liability generation products Be visible in your area of influence Network effectively Sharpen your marketing skills Walk your talk Avoid failures Use Nigeria tool (God fatherism) for as much as you can

conclusion
The summary is that Nigeria micro financing, like many other activities in Nigeria present with peculiarities far more difficult than other similar institutions else where in the world. But if we must continue in business, there is need for dexterity and focus to make a success of our operations

Thank you for your attention and participation