Microfinance Clinic

By Adolphus Abraham

A few days ago I was invited to speak on Microfinance and Entrepreneurs: Opportunities and Options at The Enterprise Hubs Open Day; a topic and incidence that have now led to this column. The Enterprise Hubs is a one-stop location that portends great meeting opportunity for businesses.

While preparing my slides, there were so many things to talk about and it dawned on me that I could take the discussion further. I realized that dealing with microfinance from the investor’s point of view has not been given much attention. Almost every clinic you attend elucidates on the opportunities for microfinance beneficiaries which include SMEs. Not much is said about it from the investor’s point of view.

I remembered that while I was seeking to be a player in the microfinance space, several entry options of going through brown field or green fields were what I had to consider. There were offers of existing MfBs placed before me that I did not see value if I used a particular approach. I opted for a fresh license – the green field – but that is not to say that buying an existing license is not a good approach. I took those decisions myself because I had the privilege of the knowledge to scientifically take that decision. Not many people do, so they rely on consultants.

The microfinance space is already agog with activities arising from the recapitalization directive from the regulator. We have already seen a major deal signed by Fina Mfb with a Bangladesh investor. I get calls every day from people asking me what it would take them to take position in the industry. So, I have decided to dedicate this space to investors who prospects the microfinance space.

The Microfinance Clinic shall be a go-to column for investors who desire to invest in the business either as sole owners, co-owners, part owners, passive owners or active owners. I shall be giving you all undocumented tips that assisted me take my decision. Perhaps they might just be of help.

In this opening piece we shall consider two issues that are paramount to an investor’s decision. Others will be discussed in subsequent editions.

Ownership

The CBN does not restrict ownership of an MfB. It is not unlawful to solely own an MfB provided you can meet the capital requirement. However, for the purpose of sustainability, corporate governance and others, the CBN does advise that you spread your ownership. Come to think of it, why would you want to own the bank alone when they say “the more the merrier”? So when you think of investment in the Mfb space, have it in mind that you can own 100% but it looks better when ownership is spread.

Other ways you can own an Mfb would be to invite your friends that share same vision, or mobilize people in your community, association, alumni. Companies can decide to float their MfB as well as foreigners.

Source of Fund

The CBN would not allow laundered funds to be used as capital in setting up MfB. They would trace every fund provided to the source. Make your statement of account available for investigation by the regulator. So if you cannot explain the source of your fund, like we say in local parlance, you can fogerrit!

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•  Adolphus Abraham is managing director, Rigo Microfinance Bank