Mr. Godwin Ehigiamusoe is the Managing Director and Chief Executive Officer of LAPO, a microfinance institution with operations in Nigeria and Sierra-Leone. In this interview with ODUNEWU SEGUN, he speaks about the growth of LAPO, its challenges and microfinance practice in Nigeria. Excerpts:
AT the 4th AGM of LAPO in 2015, your bank declared N2.8bn profit after tax in the year ended 2014. How did you managed to achieve this feat within that short period?
The simple reason is that we have been able to create an institution which provides a range of financial services to low-income people and micro-businesses on a sustainable basis. We are also addressing the challenges of unemployment. LAPO is a model to many microfinance banks and institutions in Nigeria and beyond. Put together, these provide a sense of satisfaction. However, I feel we have done well. This is why we have become a darling of this segment of the society who in actual fact constitutes the larger percentage of the society.
We will continue to consolidate on these accomplishments as well as sustain the commitment to build an excellent institution, through development of appropriate information technology architecture, sound corporate governance and risk management process.
LAPO has become a household name among small scale business owners who rely on its loan to sustain their businesses. What do you think is responsible for this patronage?
Good repayment performance is a function of a number of factors. They include staff training, lending approaches, loan application appraisal processes and innovative enforcement of credit discipline. In addition, we seek to support and build relationship with our clients in such a manner that they do not perceive LAPO Microfinance Bank as just another financial institution but as their institution.
What factors do you think enabled the growth and development of LAPO?
LAPO has benefitted from the commitment of young Nigerians who believe strongly in the ideals and future of LAPO, and we have tried to sustain this uncommon commitment. Another factor is the nature of our services. We provide financial and social empowerment services which meet the needs of a large and critical segment of the society. We have made contributions to the emerging microfinance sector in Nigeria in the area of client engagement and strong but flexible service delivery institutional structures and procedures. LAPO’s internal operating systems have been able to effectively engage our operating environment.
When you say that the LAPO provides financial and social empowerment services for a large segment of the population, has these services improved the socio-economic condition of the poor in Nigeria?
LAPO is a pro-poor development organization which promotes access to financial, health and social empowerment services. Clients of LAPO are being empowered with financial services to set up and manage their own micro-business. To that extent, we are promoting self-employment which is the best form of employment. LAPO loans have also enhanced the productivity of our clients which in most cases have translated into improved condition of living for members of their households. Our clients are able to improve the nutritional status of their household members and send their children to school. Finally, we have also enhanced the status and voice of women within their households and communities. Financially, independent women are most likely to have greater voice in decision making in their families.
What is your assessment of LAPO’s performance in terms of social and health empowerment of the ordinary people?
LAPO is not just a mere financial institution. We are much more than that. Rather, LAPO is a development institution. Right from its inception, LAPO conceptualized poverty as an octopus with several tentacles of causes and manifestations such as material deprivation, poor health, social exclusion and injustice. We realized that ordinary people contend with challenges beyond the lack of money. LAPO therefore designs and delivers services to support them to address extra-financial challenges. This explains our involvement in the provision of health and insurance services to our clients. We seek to relate with our clients in an atmosphere of mutual trust and respect. We have started the implementation of programmes that will also preserve the environment. Ultimately, we seek to achieve the Triple Bottom line of superior financial performance, social empowerment and environmental preservation.
Compared with other countries abroad, are you satisfied with the operations and progress of the microfinance sector in Nigeria?
All factors considered, I strongly believe that the Nigerian microfinance sector has not done badly. Let me put this in a historical perspective. It was in 1990s that microfinance as an international movement blossomed in other countries. Unfortunately, Nigeria was under military dictatorship. Like other sectors, the Nigerian microfinance sector was cut off from the international microfinance community and therefore deprived of the benefits. It is therefore inappropriate to compare the performance and penetration rate of microfinance in Nigeria with other countries with longer history of practice and international support. The progress made so far in Nigeria could be attributed to the commitment of the regulatory authorities and the exceptional, enterprising spirit of Nigerians. We have our challenges but I see a very bright future for microfinance practice in Nigeria.
Many people know LAPO as a non-profit organization. When did the institution transform into a microfinance bank?
Let me correct one issue. LAPO as a pro-poor development organization did not transform into a microfinance bank. What happened was that in 2010, the organization set up a microfinance bank and transferred the bulk of its microfinance operations to the new institutional vehicle. LAPO as a non-profit organization is still involved in the provision of a range of social and economic empowerment services particularly in rural communities. We came under regulation because we are convinced that the future and development of microfinance is in an appropriate and enabling regulatory environment. There were some misconceptions in a particular case, mischievousness about borrowers making deposits into the loan fund from which they take loans. This was and is a feature of traditional and non-profit thrift and credit schemes in rural Nigeria and indeed West Africa.
Let us look at the performance of LAPO. What will you consider are the achievements of LAPO?
The achievements of microfinance institutions like any poverty-reduction interventions are usually at two levels. In terms of service delivery such as how many people are benefiting and the volume of services delivered and second is the impact on the beneficiaries.
In terms of outreach and services, we have succeeded in creating a sustainable and regulated financial institution which provides a range of flexible financial services to a large number of people. LAPO’s client base rose from 355, 502 in 2010 to 518,187 in 2011, an annual growth rate of 46% which is remarkable in a challenging environment especially at a time when most microfinance institutions globally are recording negative growth. The client base rose to 593,111 in May 2012. The volume of loans disbursed to clients has also grown remarkably. LAPO disbursed N13 billion, about USD 83 million, in 2009. This rose to N21.9 billion in 2010 and N31.58 billion in 2011. This is an average growth rate of 56.5%. We target N50 billion as disbursement in the current financial year. This is an achievement when one considers the fact that the average loan size does not exceed N50, 000. As a regulated financial institution, we also provide savings opportunities for our clients.
What have been the challenges along the way?
There was the challenge of enforcing credit discipline. Rightly or wrongly, this is a prevalence of poor loan repayment culture in our environment. We were able to address this about twelve years ago.
Perhaps the most challenging issue was around getting the right Information Management systems. Most microfinance institutions have also tasted the bitter pill of automating data processing and reporting systems. At a point when we tried to acquire software, there were few untried ones in market. We did not also get the right technical support. The worst part of it was that one of the guys we turned to assist in this regards used this particular challenge to hurt us.
Are there other non-financial services LAPO offers?
We offer health and social empowerment services to our clients in collaboration with other institutions. We support the education of their children. In 2010, LAPO began to collaborate with a major insurance company to deliver microinsurance services to clients. Let me give details. In 2006, LAPO won the Grameen Foundation Excellence in Microfinance Award. The award came with a cash prize of $10,000. LAPO used the amount to set up a scholarship fund. Annually, LAPO makes contributions to the fund. The scholarship awards cover secondary education. We focus on secondary education because it is a known fact that children from low-income households drop out of the education system at that level.
A total of 704 children have so far benefitted from the scholarship scheme managed by a Board led by Professor Christiana Okojie. LAPO in collaboration with LAPO NGO operates a Legal Aid Unit which has been helpful in supporting clients in distress. Our clients are provided with insurance for fire in the market place, a risk they usually face. Another policy that has excited and helped our clients is the medical cover for complications arising at child birth.