An entrepreneur and a foremost microfinance practitioner, Dr. Godwin Ehigiamusoe is the chairman and founder of Lift Above Poverty Organisation (LAPO). In this interview with SEGUN KASALI, he discusses his entrepreneurship journey, challenges facing microfinance banks and many other issues.
Having spent more than three decades in the microfinance sector, Dr. Godwin Ehigiamusoe, who is the chairman and founder of a prominent microfinance bank, Lift Above Poverty Organisation (LAPO), has written a book entitled “Touching lives. My LAPO Journey” in a bid to share his entrepreneurial experiences for the advancement of the sector.
According to him, the book was essentially prompted by the need to share his experience especially when he realised that for over 30 years, he devoted his time to be a part of the team locally and globally that developed what is called microfinance today and the feeling that there is need to give some clarity and insight on how and why microfinance as a practice started.
While giving insights on how it started, beginning with Nigeria, he tried to identify the key elements of the microfinance practice in the early days, especially highlighting the fact that what is called microfinance today is quite different from microcredit that it was called then.
Dr. Godwin noted that it was essentially to address poverty as it was more or less delivered by non-governmental entities and essentially the supporting agencies were usually donor agencies.
During his comparative analysis, the founder said that microfinance is highly commercialised now-capitalised by private capital and it is now really done in a manner that most of those who are really involved are actually expecting a return from equity and of course putting attention or priority to profitability.
He spoke to the fact that he wanted to also analyze those entities – donor agencies and practitioners – who were involved at that time especially in relation to Nigeria and look at the transition from that non-profit perspective especially with the emergence of microfinance policy and regulatory framework.
A journey with mixed blessing
The founder said that it was quite challenging to convince people to accept what they were doing because people were not used to some of the features of microfinance, citing an instance that people were used to money lenders demanding for collaterals, but they were giving out some amount of loan without collateral and people thought that it was too good to be true.
Ehigiamusoe explained that it was discouraging getting people to buy in but the challenges were eventually surmounted, adding that the issue of insufficient funds to finance the increasing demand for loan became a cog in the wheel as it was very clear that donations by donor agencies was not going to be enough to implement a growth plan.
He also identified the issue of human resources as there were no financial institutions to draw the staff from.
The chairman said such propelled the need to invest in training that led to the creation of a monotechnic, LAPO institute, with huge competence in delivering microfinance training and research.
Most striking experience on the journey
The microfinance guru noted that the sustainability of the business was quite striking, stating that he never knew microfinance would be regulated in retrospect.
Dr. Godwin added that he never knew microfinance would be able to reach a large number of people because it was poised towards meeting the immediate needs of the immediate environment at the starting time and access to credit, health awareness were the focus.
He described the level of commitment by young Nigerians who actually believed in his vision and capacity to lead them as unprecedented.
“For me when I look back, it is how were we able, at the very early stage, to come up with that level of commitment to what we were doing?
“We were more or less embarking on a journey that was obviously not charted. So, we were on a path that was not sufficiently created. The sustainability of the business for me is quite striking.
“Also, I never knew when we started several years into our journey that one day microfinance would be regulated.
“I never thought for one day that microfinance would be able to reach a large number of people because it was more like let us meet the immediate needs of the immediate environment when we started – access to credit, health awareness but now we have gone beyond that.
“Those for me are quite striking. The final for me is the level of commitment by young Nigerians who actually believed in the vision I shared with them and also believed in my capacity to lead them,” he said.
The push-pull factor
Dr. Ehigiamusoe described his motivating factor as deeply rooted in his university days as he was involved in activities designed to better the conditions of living of the people at the bottom ladder of the society, adding that such made it clear that he was going to work in an environment that touches the ordinary people when he left the university.
He disclosed becoming a trained professional in his postgraduate programme having joined the cooperative movement and was actively involved but got disillusioned in the process.
“The first thing is that in the university besides my academic work, I was also involved in some other activities that were required to sensitize the university students who we considered as potential elites and leaders of the nation on the need to better the conditions of living of the people at the bottom ladder of the society.
“If you like, call them the masses. So, we organised ideological classes and I led the organisation for about one year.
“And so, when I eventually left the university, it was very clear that I was going to work in an environment that touches the ordinary people.
“So, I joined the cooperative movement. I was trained professionally in my postgraduate programme.
“And of course, I was actively involved in the rural area at the cooperative. But, along the line, it became clear that I was disillusioned,” he said
Raising more than four million people out of poverty through LAPO
The chairman revealed that over four million people, both in Nigeria and Sierra Leone, are currently in the LAPO system even though it is very difficult pegging a number as millions have passed through LAPO via credits, savings opportunities, health, insurance support and so on.
“I can say we have served millions of people who have passed through LAPO for various forms of services- credits, savings opportunities, health problems, insurance support and all that.
“So, it is in the millions and we can’t put a figure to it. But, in the entire LAPO system today, both with loan and other services put them together, we should be talking about 3-4 million people both in Nigeria and in Sierra Leone.” The Chairman revealed.
On Microfinance playing effective role in the country’s economy
LAPO chairman encouraged his counterparts to take the practice forward by embracing digitalization as the current operating environment is different from the way it was then.
Dr. Godwin explained that most microfinance banks are confronted with the issue of access to finance and inability to mobilize sufficient equities to meet borrowers’ low request.
“We should take the practice forward and identify the trend in the sense that the way we do microfinance about years ago would definitely not be the way we do it now.
“There is going to be a huge element of digitalisation. So, there must be a very clear, conscious, and determined plan and actions by Microfinance banks to begin to digitalize their products and of course digitalize their product and service delivery channels.
“So, I think the number one challenge most Microfinance banks have today is access to finance. The truth is this- perhaps by the nature of Microfinance banks and their own profile, most Nigerians don’t have a sizeable amount say N30,000 or N40,000 with them but with the commercial banks.
“But, if they need a loan of N100,000 or N200,000 or less, they run to Microfinance banks.
“So, the problem therefore is that Microfinance banks are not able to mobilize equities that would be enough for them to meet the low request of the borrowers.
“So, it is for that reason that Microfinance banks are looking for so many opportunities where they can mobilize funds for the purpose of core lending.” Dr Godwin explained.
Sustainable approach for Microfinance banks
He said Microfinance banks should be able to source funds from commercial sources and access the capital market.
“I think a more sustainable approach to bridging that gap in order to channel funds to the Microfinance banks would be from commercial sources and of course, access to the capital market just like two or three years ago, LAPO issued bonds and we were able to raise some substantial amount.” He said.
On the sector’s recapitalization
He acknowledged recapitalisation as a solution to some of the microfinance issues, but emphasized their profile even as there is unavailability of ready investors keen on recapitalization.
“But again, the process of recapitalization actually means raising funds. But, the challenge there is- by the profile of Microfinance banks in this country, you do not have very ready investors who want to be involved in the process of recapitalization.
“So, that makes the recapitalization requirements very tough for Microfinance banks.
I hope eventually that will be addressed. But, what it is today is that it is tough for Microfinance banks to attract investors with the right funds for the purpose of recapitalization.” He said.
Projected SMEs future
Dr Ehigiamusoe, who described Small and Medium scale Enterprises (SMEs) have always been branded as the bedrock of any economy, noted that they require access to funds to play their effective role.
He suggested the need for capacity for owners and managers of SMEs in order to achieve one thing and that is to scale them up.
“This is because I believe you could continue to be an SME as you are and you can’t scale up which means you won’t be able to make a sufficient contribution to the economy.
“Small and Medium scale Enterprises (SMEs) have always been branded as the bedrock of any economy.
“Making SMEs to play that role requires a lot of factors which include access to funds and I think Microfinance banks, Central Bank of Nigeria and other financial institutions are doing that.
“But, I still also believe that there is a need for capacity for owners and managers of SMEs in order to achieve one thing and that is to scale them up.
“This is because I believe you could continue to be an SME as you are and you can’t scale up which means you won’t be able to make a sufficient contribution to the economy.” He said.
Suggestions to the government
He advocated for a policy framework that supports the SMEs, which involves creating the financial architecture to ensure that SMEs are able to access funds on an affordable basis.
Ehigiamusoe said there is a need to develop the capacity of owners and managers of SMEs, noting that educational institutions should feature prominently by identifying key elements of SME practice and incorporating them into existing courses in the university.
The Founder added that various entrepreneurial development sectors should develop remote training to support SMEs as the biggest enemy of the SMEs in any economy Nigeria inclusive is the deficit in infrastructure which is the clear responsibility of the government.
“There should be a policy framework that will support the SMEs. Of course, we would be talking about creating the financial architecture to ensure that SMEs are able to access funds on an affordable basis.
“Of course, there is a need to develop the capacity of people who will own and manage SMEs. And this is where I expect educational institutions to come in. We need to see how we can identify key elements of SME practice and incorporate them into existing courses in the university.
“For instance, Business Administration should have a component of managing SME for instance.
“And of course, the various entrepreneurial development sector should be able to come up with remote training to support SMEs. Of course, tax concession is also very important for them. Overall, the biggest enemy of the SMEs in any economy Nigeria inclusive is the deficit in infrastructure. This is the clear responsibility of the government.” He explained.
Appraising the 2020 Finance Act exempting SMEs with less than N25million annual revenue from paying Value Added Tax.
The LAPO Founder commended Federal Government’s decision in the 2020 finance Act exempting SMEs with less than N25million annual revenue from paying Value Added Tax.
He, however, noted that such gesture could be pushed further by giving concession on company tax to SMEs qualified for such tax and also on the number of staff for engaging a number of people.
“For me, it is commendable. I think that it can be pushed further.
It could also be turned into concession on especially company tax if the company eventually qualified for tax payment.
“Concession also tie to the number of staff they have. If you are an SME, you have an x number of employee.
“You could be entitled again to this tax rebate. You should also be entitled to some sort of support by the government simply because you are engaging a lot of people.”He noted.
Advice to budding entrepreneurs
Dr. Godwin urged budding entrepreneurs to watch the societal trend, be focused, avoid distractions and must be able to engage and motivate others.
“I think it is important for them to take time to look at the trend in the society. Don’t just say that you simply want to set up a business. That is very important.
“The second thing which is also very important is that they need to be very focused.
“You must avoid distraction. Put your mind to what you are doing.
“In my journey for instance, i had a lot of opportunities to be distracted. Some of them offered me international trips.
People offered me great opportunity with all remuneration. Even when LAPO was still operating from my sitting room, I made up my mind not to be attracted to those things.
“And of course, you should be able to engage and motivate people to do it.
“You should know that no matter how intelligent you are, how enterprising you are, how energetic you are, you cannot be more than one person. Therefore, you need others to work with.” Dr. Godwin stated.
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