AYOKUNNUMI OLUGBEMIRO is the managing director of Liberta Leasing Limited, an innovative consumer finance company optimised to facilitate finance and loans, create accessible credit for individuals and businesses, as well as equipment leasing. In this interview with Business A.M’s ONOME AMUGE, th entrepreneur and consultant provides insights about consumer lending and business financing in Nigeria, loan service challenges and prospects in the consumer finance industry. Excerpts:
There are a lot of talks about job security challenges in Nigeria. Why did you decide to resign from your previous secured job to pursue entrepreneurship, a field considered financially risky with little security in the short term?
To be honest, entrepreneurship is not easy and takes a risk taker and someone that has a daring heart to go into it especially when one considers the challenges of today.
One of the things that informed my decision in resigning is that all my life, I have always worked as an intrapreneur, building people’s businesses and I do well at it. I build their businesses from zero to a billion-naira worth company and it has been my key strength. At a point, I thought it was time to establish a business on something innovative that I could do effectively and create more impact.
Another thing that pushed me into entrepreneurship is that working for people doesn’t give me the full opportunity to execute my ideas as I am constrained to execute only the idea and vision of those I work for.
Though I aligned myself with the company’s ideas and vision, there were things I knew would bridge a gap for the space I worked in, but when I go to my bosses to discuss about these ideas and they say ‘no’, it’s like they can’t fulfill my dream.
At that point, I knew I had to get on the journey myself to be able to fulfill my vision and execute what I felt would be the next step in the finance space and realise it without hindrance. So I took the decision to undergo the risks myself with the readiness to bear the implications. I only feel fulfilled when my creative mindset is executed.
How have you been finding it as a female entrepreneur in a male dominated industry?
I don’t see that as a barrier because I have always been of the opinion that a woman has more capacity to do more than a man in this field because a woman is multi-talented, can multi-task and has the capacity to manage and groom investments. Women are natural builders so I don’t see it as a challenge. I only feel that women should come out more to prove themselves rather than take the backseat and leave it for the men only. The men also need the women to function effectively and I believe that a working relationship between the two genders is needed to grow the fintech industry.
In Nigeria, starting a business is quite challenging because the economy is not favourable to us. When I was about to launch my app, I realized that CBN had stopped all third parties and financial institutions that are not commercial banks from making BVN verifications which is a big deal because that is one of the major KYC requirements used in giving out loans. Immediately they did that, I was forced to think of other alternatives.
How were you able to overcome that challenge considering the CBN ban on BVN verification?
There are other KYC methods just that the BVN is the major one. Another reliable KYC verification method is the National Identification Number (NIN). We started looking at exploring the NIN method which is also one of the requirements for every Nigerian citizen and ensuring it is available on our platform.
Another form of KYC we used as an alternative is getting the physical address of our customers and their pictures. On the platform, there is a space where you are required to take a selfie rather than upload a picture.
This is because anybody can upload a picture which may not be the real image of the person. If the person cannot take an instant selfie, it could be that the person has something to hide and we cannot give a loan to someone whose picture is not verifiable.
What is your assessment of Nigeria’s financial system in line with the CBN regulatory framework for fintech companies such as yours?
If the finance industry is well served, I think the economy will open up. Take for example, you start a business and you need a fund and Libertal Leasing is able to give you the fund to start the business, with that, you will be able to generate income, employ people automatically reducing the rate of unemployment.
If CBN is providing access to funding, grants , financial inclusions and identifying fintechs that are doing well on the space, I can tell you that the economy which is one of the fastest growing economies in Africa will open up more.
When you are starting a business and you do not have access to funds, there is a problem. Cash is the driver to any business. A business can have a lot of fixed assets, but if it does not have cash, that business would die as soon as possible.
Because you won’t be able to cater for your operational expenses and this is one of the challenges we have. While there are complaints about rising inflation and unemployment, we will be able to cut this into bits and pieces from our end. Right now, the government is not doing anything for us.
Don’t you think the CBN’s regulations and bans is a measure to curb fraudulent activities in the finance sector?
I will say that in everything we do as a country, we need to consider the costs and benefits. When the benefits outweigh the costs, then it is a good deal. It is true that fraudulent activities go on in some fintech companies and even in the banking sector but we have agencies responsible for checking these.
We have the Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices Commission (ICPC) and others formulated to curtail fraudulent activities. Besides, before you start this kind of business, you go through a lot of requirements and registrations.
Even before my app could be sited on the App store, I went through a lot of documentation before approval. Also, before I could get approved as a lending/finance company, I got my license from Equipment Leasing Association of Nigeria (ELAN), I also got a lending license from Lagos State government as well as other registrations as well.
It is a tedious process and whoever has gone through these rigorous procedures to get to this stage has to be protected and supported by the CBN.
Other countries of the world have started adopting bitcoins and other cryptocurrencies for transactions but in Nigeria, but reverse is the case. The central bank keeps coming up with stringent rules and bans that frustrates the growth of a lot of businesses instead of working towards regulating transactions and ensuring transparency.
What is your view about the level of competition between fintech companies and Deposit Money Banks (DMBs) in relation to customer retention?
Banks should not see fintechs as competitors because fintech companies still rely on banks to facilitate transactions and every fund and transaction done by fintechs passes through the banks and are regulated by the CBN.
Rather than see the fintech companies as threats, banks should promote fintechs by giving them access to funds and loans. There are cases in which banks are hesitant to provide loans for individual customers, preferring to service private businesses instead because they are more viable. In such situations, the fintech companies come to play in servicing such individuals and shoulder the risks.
How easy is it to find funding and investments in your industry?
It is not a child’s play to get funding or have someone give you money to make investments and I understand people’s perspective because over the years, some people have put their money in some kinds of investments which failed or couldn’t make returns as expected.
As a result, a lot of people withhold their money and refuse to give out funds due to lack of trust. One thing I must commend the CBN for is the cancellation of the money market and encouraging people to invest their money in businesses.
Another thing is that when people make investments, their expectations are too much. Take for instance, someone who has N1 million and wants to invest for three or four months but is asking for 40 per cent in return without a consideration of how much the business is making as net profit within that period.
People should check the investment opportunities of businesses they put their money in and expectations should not be too high to avoid falling into fraudulent deals and end up losing their money. At Liberta Leasing, we cannot give what we don’t have and don’t promise what we cannot deliver. We give up to 10 per cent per annum on our investments and pay without excuses.
If people want to invest in your business, what are the major procedures and requirements?
Right now, our investment service is still a work in progress and not yet available on the app. You can walk into our office and discuss with any of our investment managers who will guide you through the process.
Besides, we will also profile your account, gauge your risk appetite to ascertain the level of investment you can make and advise you on how best to diversify your portfolio so that you get the best and most suitable offer.
Talking about the Nirra app recently launched by your company, can you give an insight about the app and what are the promises it has for the Nigerian market?
Nirra is a loan lease and lifestyle app that offers small loans like the nano loan, quick fix and emergency payments. You can pay for your cable tv and data subscriptions, electricity bills to any of the Discos across the country, students are also not left out as they can also purchase WAEC registration and result check pins on our platform.
You can also buy insurance on the platform which is powered by Leadway Assurance. We have some roadmaps on what we intend to achieve in the next few months. We also have an in-house credit score which is still a work in progress. Why we are making this inclusion is that we noticed the credit bureau is not enough to ascertain the credit worthiness of individuals.
We want to ensure all transactions made on our platform are scored to ensure credit worthiness of our customers. This is done using a lot of Artificial Intelligence (AI).
We are also connected to the credit bureau which acts as one of the information sources for the credit score part. What we want to achieve is ensure that our customers have a credit worthiness that can be presented to any loan company and get a loan not necessarily on our platform.
There is an internal way of scoring people which is very vast and unique, including a featured investment where people can invest their money in different kinds of products. The investment is going to be like a platform whereby different organisations can place their products/services such as agriculture, real estate among others on the app.
One of the things Nirra App would deliver to its customers is ease of making transactions. The app also helps to track customers’ behavior through our machine learning, AI and other consumer behavior trackers.
From your transaction history, we are able to know the things you love buying and help us understand our customers better. We are also working towards making it a one-stop-shop app where you can do virtually all your daily transactions such as travel tickets, hotel bookings, food purchase and much more. We are also looking out for more investors who understand our vision and are willing to work with us on this.
Don’t you think monitoring your customers’ transactions could be regarded as privacy infringement?
How much do you think quick loan companies have been able to affect the Nigerian consumer finance sector?
I will say some companies have been able to affect it positively while others have affected it negatively. Quick loan companies weren’t established to give out loans just because they want to push out money.
Rather, they are expected to give out loans because the customer meets requirements and has the capacity of paying back. So many loan companies do not check this and just want to push the money out and this has affected the business negatively.
About 10 years ago when we had very few quick loan companies, the industry was well conserved and the default rate at that point was very low because people only borrowed during financial emergencies when they really needed the money.
Nowadays, some quick loan companies seeing that they have a lot of money in possession just want to push out these money and pay little attention to requirements when giving out loans. At Nirra, we access information of loan applicants and scrutinize capacity to make refunds within the stipulated period.
What are the strategies being adopted to manage loan risks?
One of the strategies we have adopted is thorough underwriting. We have an in-house underwriting system that we use.
We also access information from the credit bureau to check credit reports and insure our loans with Leadway Insurance in case death, permanent disability or any misfortune occurs that could result in the customer not being able to repay the loan.
The insurance enables us to get the loan repaid whenever payment defaults arise. Another thing is that when we give out salary loans, we ensure that, the loan applicant is pensionable.
The pension serves as an assurance the person will be able to repay the loan even if the person loses his/her job. These are some of the areas where we look at how we can reduce our own risks.
Analysts consider lack of scalability a major factor affecting many Nigerian businesses. As a business owner, how scalable will you say your business is?
Operating a business in Nigeria is scalable if we do some certain things right. We are a customer centric company and all our services are geared towards creating optimal satisfaction to our customers.
I can boldly state that since this company was established, we have recorded over 95% customer retention rate. We sell ‘speed’ and don’t waste our customers’ time. They can always rely on us.
When they say they need money and we are unable to provide funds for them due to some reasons, we let them know immediately so they can look for other options. When we approve loans, we ensure the funds are disbursed at the time promised because we consider our word as a bond in the business.
Asides from our sales representatives and other channels through which we advertise our services, our customers often act as referrals to others, telling them to patronize us whenever they need our services. Business relationships and consumer satisfaction are key to making progress in entrepreneurship and any business that focuses on its customers will always scale especially in this line of business.
If you could change something about the consumer finance sector, what would it be?
One of the things I would do is plead for businesses in my industry to report default clients to the credit bureau and also, track clients that go to different loan houses to take money and default.
We should also have organized meetings where we discuss building each other’s businesses. Rather than seeing ourselves as competitors, we should consider each other as builders of the economy.
There should be forums where we come as a group to discuss client issues and innovations. If we have that kind of relationship, we will be able to offer syndicated loans where we mutually offer loans to individuals or businesses.
It is only when we have a good relationship among ourselves that such ideas can be feasible. One of the things I will like to be remembered for helping businesses grow and see their visions come to life.
That is why we have a Corporate Social Responsibility (CSR) plan to mentor and guide startups with creative ideas and also support them with non-interest funds to execute their plans.
When such businesses grow, they help reduce unemployment in different ways and also strengthen the economy. Money is not meant to be stacked somewhere and made redundant when there is an idea or lucrative business that is limited by funds somewhere.
Another thing I would also say to entrepreneurs is that when they get funds or finances for their businesses, such money should not be used for personal needs.
To be an entrepreneur, you have to be extremely disciplined in utilizing funds solely for what it is given and not executing it for something else. This is one of the things that kill a lot of entrepreneurs who don’t know how to differentiate between business and personal expenditure.