Stamp Duty Is A Setback For Banks – Bunmi Lawson
The Interview Magazine
Bunmi Lawson is the Managing Director/CEO of ACCION, Nigeria’s leading microfinance bank, which started operations in 2007. She possesses a master’s degree in Business Administration from the IESE Business School, University of Navarra among other professional qualifications, is an alumnus of the Lagos Business School and is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN). She has attended several courses locally and internationally, including at Harvard Business School and has tucked under her belt over 18 years of working experience in various areas of the financial world. She speaks about micro financing in Nigeria, among other issues.
It is said that the cardinal objective of micro financing is poverty eradication; do you see that happening in Nigeria with the set of microfinance banks we have at the moment?
The role of a microfinance bank is to aid financial inclusion, to enable those who don’t have access to financial services benefit from the services. As an offshoot of that, when you have access to financial services, it gives you the tools to be able to address the issue of poverty and lack of income and how to grow your income. I use the example, say, of a trader near the Lekki Free Trade Zone. With the increased construction activity and a growing number of personnel working there, there is an opportunity for her to increase her business and to serve more customers. She will need more capital to do that and that is where we come in. We can be enablers. Access to financial services can be a tool that enables people who are committed to working their way out of poverty to do so in an easier way. However, it is not just about the loan, it’s about the ability to save and access to insurance among other things and all these factors are important.
Microfinance thrives best where there is economic growth. In itself, microfinance cannot alleviate poverty without economic growth on aggregate levels. The total assets of the entire microfinance industry in Nigeria are too small to meet demand. We are potentially looking at roughly 50 million customers based on our population, yet less than six million are actually served. There certainly needs to be an increase in capacity. ACCION did a study (we’ve been in existence for nine years) and found that on average, our clients have been able to increase their income in three years by 300%. The Heroes Index, which indicates whether customers believe that they are doing better overall having had access to financial services, scores us a 7.9 out of 10. Our customers believe that they are enjoying better health etc. Individually we are making an impact, but we need aggregate increase.
There is the belief that the Nigerian model of microfinance is deeply flawed, as it is not seen as being for the poor but for traders, suppliers and importers, and this accounts for the cutthroat interest rates that Nigerian microfinance banks charge. What can you say about this?
I do think they serve micro entrepreneurs. Most loans are still within the $600 range. Our largest single loans are about N3m. We give as low as N12, 000 to traders, market women and similar people. We try to reach the bottom of the pyramid.
The key issue to being able to serve those at the bottom of the pyramid is that of scale. You realise that in urban centres, increased overheads and other costs make it less efficient to lend micro funds to a large number of people. Perhaps sometimes this is where others might fail. Another part of the problem is the size of the entire microfinance industry. There is still more demand than there are providers.
Nigerian microfinance banks seem to insist on collateral, thereby excluding many who could otherwise benefit from their services. How do you think we can get around this challenge?
The key thing is financial inclusion. Why are these people excluded? Sometimes, other conditions imposed by financial institutions are beyond a micro entrepreneur. We have removed these. We tend to ask for what I would call social collateral. We lend more on these. The guarantor will be someone who knows the customer well and is sure that they have the character to pay back the loan, beyond just the capacity. Other microfinance banks might focus more on SMEs, therefore they ask for physical collateral. Our loans are 5%-30 days par. That means that only 5% of those we lend to are delaying payment for more than 30 days. We focus on people whose businesses are their main earner. They realise that the only way they can sustain themselves is by ensuring that they repay, therefore it is important to them. Capacity building is also important. They need a good knowledge of how to make money and how to pay back.
Do you see a future in Nigeria where microfinance is not profit-oriented?
There is nowhere in the world that I see this happening. Microfinance is not charity. If that were the model, you would only be making people more dependent. They need access to finance.
Secondly, to get capital, you need to fund the sector. We need to accept this. Profitability and price are not the main issue. We enable people to transform from micro entrepreneurs to SMEs. I don’t think high interest rates are a micro entrepreneur’s first concern where they know that their lives will be transformed beyond their dreams. Imagine a dressmaker, sewing by hand and making maybe a garment a week. This same person has access to finance and buys a machine. He can now make several items a day and thus increase his revenue. You will find that he won’t complain about the interest rate.
Would you say that the prevalent monetary policies are hurting or assisting the microfinance sub sector?
The Central Bank of Nigeria (CBN) has done well so far. There are more than one thousand microfinance banks across Nigeria. But how do we increase our scale? A paid-up capital of N20m is good for the rural areas, but is not adequate in urban centres and needs to increase.
The CBN has also set up a Financial Inclusion Department. Working with the CBN, Accion has a scheme where we give loans to people living with disabilities. They are traditionally underserved. Essentially, policies are supporting.
Some policies can set us back, such as that of stamp duty. For those at the bottom of the pyramid to maintain accounts, there have to be supportive policies. Perhaps there is a need to have a rate that seems fairer for their kind of transactions. The 2014 EFInA Financial Inclusion Report showed that account maintenance was stagnant. My fear is that there will be a drop by the time of the next report, if micro entrepreneurs believe that maintaining an account has become too expensive for them. I understand the need for government to seek ways of driving revenue, but not at the expense of any sector.
You have been MD since 2007, what’s a typical day like for you?
There will be many meetings. Some will be with staff, others with management. I find that many Nigerians have good ideas, but implementation is always poor. Therefore a lot of my time is spent making sure that we are properly executing our projects.
I spend a lot of time thinking about strategy; how do we take the bank forward, how do we achieve our aims? I go through emails, especially from the ACCION network. There will be paperwork to go through, but 80% of time is spent monitoring and following up.
Under your leadership, ACCION has won the Lagos State Enterprise Award for Best Microfinance Bank several times, among other awards. How have you been able to achieve this despite the sometimes-challenging business environment?
It’s a combination of many things. Number 1 is our people. The shareholders are committed to the vision and they ensure that we stay true to it. Also because of the strong shareholders, we have adequate capital.
Secondly, senior management and staff selection. We don’t just look at experience; something must connect you to our mission. It is something over and above salary earning. For example in one of our staff sessions, nobody gave feedback about salary. Other questions were raised but not about remuneration. We truly want people to feel pride in the fact that we are transforming lives. I believe it is that commitment that sets ACCION apart. We make sure that our brand is strong, we publish articles and we keep on learning.
Using your career, what are your thoughts on the issue of women and leadership?
Historically, men were better educated and given more opportunities. Therefore, women started the race a bit later and that is one of the key reasons for the gap. However, women are doing and achieving amazing things despite that. You will find that women are sometimes even the breadwinners now. I believe that transition from the traditional male-dominated environment needs to be managed well. The family is the foundation of society.
Can we have it all? No. It is more about balance. I compare it to juggling balls; some are in the air while others are in your hand. The important thing is that there is a balance in all aspects of a woman’s life. If she decides to get married that’s fine, but it is important to have a supportive husband.
I have found overall that you just need to do your work excellently. There is no way that gender bias can come into it if your work and performance are excellent. Women maybe have to work harder to prove their worth but essentially, women who are successful are those that have gone for it.
Women need to choose organisations where professionalism is paramount and merit is the basis. There are probably more issues that women face with family and cultural stereotypes than in the corporate world.
Women are now supportive of each other. There are organisations reflecting this, there are gender-specific funds available to women entrepreneurs etc.
Every successful leader has at least one ‘could have done it better’ story. What is yours?
I believe that even that path has led me to where I am today. For example at university, I was so unused to having freedom that I let my studies suffer. I didn’t do well and had to stop the course. I ended up qualifying as an accountant. The key issue is to learn from it. What I learnt about my university setback was that I should still make sure that I qualify and be among the best. I did that. I passed ICAN at the first attempt.
As I get older, I think not only of self-actualisation but also of how I can create an impact. Nigeria has huge potential, yet we are where we are. It is an area of concern for me. Traditionally, politics was not seen as an attractive career prospect. Looking back, I wonder whether it is perhaps something too often set aside. We need to speak out more.
We need to think about how we can transform leadership, how to get good leaders into positions in Nigeria. We need to start discussing this as a matter of urgency and in an innovative way.
What have been the high points of your varied career?
Meeting the people who I consider to be mentors. For example, Fola Adeola. Being Executive Director at FATE was a transformation of what I was. I believe work has to truly influence society over and above earning a salary. Before that, Mr. Thorpe at Tequila led by example. I took a lot away from watching his management style. Mrs. Bola Adesola, Mrs. Sola David-Borha and Mrs. Ibukun Awosika have all truly supported and mentored. The totality of my journey has prepared me for the role of MD at ACCION. Having not come from a background of banking and now heading a microfinance bank has been because of my varied experiences.
Personally, high points must be my two daughters. Both want to be entrepreneurs and are doing well.
When you were younger, what profession did you want to go into?
My mother was a nurse in the corporate clinic of then National Oil. She studied Industrial Nursing. Watching her made me want to be in the medical field and I wanted to be a doctor. I applied to the University of Ife and as I mentioned earlier, my path changed midway. My father was an accountant and urged me in that direction. He was able to say ‘I told you so’ when I ended up as an accountant.
Many think that Nigerian women spend too much on clothes, what’s your view on this?
Do they? It is who we are as a people to want to look good. To look good costs. However, that is relative. As a designer, I can’t say that they spend too much. We Nigerians are showy but all over the world, women spend on fashion.
On a lighter note, what’s on your bookshelf?
I have a houseful of books and I love to read. In fact, ACCION gives a Personal Development allowance, either to get training or to buy books. I use mine to buy books.
On my shelf right now is Blue Ocean Strategy by W. Chan Kim. I have read it several times, but I keep going back to it, because it gives you a methodology for innovation. It is the first book that I’ve seen that documents a process that could lead to innovation. Although I do believe you’re born with a flair for innovation. I’m also reading Scarcity by Mullainathan/Shafir. It talks about the transformation created in your mind when there is scarcity. There is a disruption in long term planning as you can barely see beyond the scarcity. This has helped with marketing. If I know our customers and how scarcity might affect them, it helps us to see how we can include them financially.
Execution by Larry Bossidy. One of our weaknesses in Nigeria is the execution of strategy. This book tackles that.
Audio books are my new next best thing. They allow me to have my hands free to do other things.
Bringing your Boldest Self to Your Biggest Challenges by Amy Cuddy talks about harnessing your boldness. I am also reading Hard Choices by Hillary Clinton.
Imagine that you were stuck in a lift, who would you most want to be in there with?
I will answer that in a strange way: Bunmi Lawson. I like my own company. It gives me time to think and really be. I don’t like confined spaces and I like to have a good amount of personal space. I would probably also pick my children, because they would be on my mind if I were stuck in a lift. As they are now young adults, they are more like my friends and I would want them with me.
If I were really pressed to pick some people:
Khalil Gibran – I wonder what was going through his mind when he wrote The Prophet.
Hillary Clinton – her amazing career path in a country as big and prominent as America.
Nelson Mandela for his leadership qualities. What makes so many people want to emulate him?
Even some crazy people like Hitler, to ask him what exactly was going through his mind when he made his crazy decisions.
Some of our clients – I see them as role models. We don’t celebrate them enough. There are surprising gems out there. The challenges that they overcame to get where they are truly are inspiring. That is why I never miss a customers’ forum. I learn a lot from them.