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Empowering the poor for wealth creation

By AYOOOLA OLAOLUWA

When Charles Godwin Ehigiamusoe founded the Lift Above Poverty Organization, popularly known as LAPO as a non-profit entity in Ogwashi-Uku in present-day Delta State in 1987, little did he know that the relatively unknown outfit will later become a phenomenon.

The then young Ehigiamusoe set up the organisation in response to the effects of the implementation of the Structural Adjustment Programme (SAP) in 1986 introduced by the administration of former Head of State, Gen. Ibrahim Babangida.

With little or nothing to celebrate, LAPO got its first grant from the Ford Foundation in 1991 and was formally incorporated as an NGO with the Corporate Affairs Commission (CAC) in 1993.

In the year 2004, Ehigiamusoe scaled up LAPO as a sustainable and effective lending institution drawing inspiration from best practice model of Grameen and ASA methodology in Bangladesh.

However, despite LAPO MfB’s deep involvement in the microfinance sector, it only obtained the approval of the Central Bank of Nigeria (CBN) to operate as a state microfinance bank in 2010 and in 2012, an approval as a national microfinance bank.

Since then, the financial institution has not looked back. Thirty-two years on, the outfit has recorded impressive performance and growth, making it the undisputed king of the microfinance industry.
LAPO MfB has two key shareholders – LAPO NGO and Dr. Godwin Ehigiamusoe – who
owns 67.10% and 30.10% equity stake respectively. The remaining 3% is held by five non executive directors. The bank is governed by a nine-member board of directors, which includes six non-executive directors and three executive directors – including the Managing Director/CEO.

LAPO’s operating strategy involves providing financial services to low-income households, micro-enterprises and small and medium scale enterprises. The bank provides financial services to businesses in key sectors including trading, agriculture and education. It operates from 483 branches in Nigeria with a head office located at LAPO Place, 18 Dawson Road, Benin City. The bank’s branches are spread across twenty eight states, including Edo, Lagos, Anambra and Rivers.

Some financial experts who spoke to our correspondent said LAPO MfB’s dominance of the microfinance industry will persist for a long time given the firm’s aggressive and skillful organizational abilities.

According to a Final Rating Report on the firm by Agusto&Co., a research, credit rating and management firm, titled: 2018 Non-Bank Financial Institution Rating: LAPO Microfinance Bank Limited, the bank remains the largest microfinance bank operating in Nigeria on the basis of total assets, earnings and pre-tax profits.

Agusto rated the company ‘A-’ (A financial institution of good financial condition and strong capacity to meet its obligations) in the report, ascribing it’s strong market position, good capitalisation, good liquidity and funding profile.

“Over the last three years, LAPO’s total assets have grown at a compound annual growth rate (CAGR) of 19.3% to stand at ₦67.3 billion as at 31 December 2017.

Growth in assets has been underpinned by substantial growth in the loan portfolio – which increased at a CAGR of 16.2% over the same period.

“Profitability indicators remained above industry standards during the three-year period, with an average pre-tax ROA and ROE of 10.4% and 49.5%.

“As at 31 December 2017, LAPO Microfinance Bank Limited had fully paid-up share capital of ₦2 billion. As at the same date, total shareholders’ funds stood at ₦16.1 billion – significantly higher than the regulatory minimum of ₦2 billion for national microfinance banks. Core capital increased by 18.5% and was largely supported by earnings accretion. LAPO plans to shore up capital in the medium-term through a private placement.

“As at reporting date, the Bank’s Capital Adequacy Ratio (CAR) stood at 28% and was above the regulatory minimum of 10%, though much lower than the selected peers – NPF (41.9%) and Accion (46.6%). In our opinion, the Bank’s capitalisation is good for its current business risks.

“The Bank remains adequately capitalised for current business risks. As at 31 December 2017, LAPO’s capital adequacy ratio (CAR) stood at 28% – significantly higher than the regulatory minimum for microfinance banks operating in Nigeria.

“The funding profile largely relies on local currency borrowings as the Bank seeks to reduce foreign currency risk exposure. LAPO also continues to benefit from a wide pool of low-cost deposits, which has pushed the cost of funds lower.
“Weighted average cost of funds (WACF) stood at 6.75% in 2017 (2016: 7.1%) and dropped to 6.59% as at 30 June 2018. LAPO has also maintained a healthy liquidity position, with a liquidity ratio of 43.7% – higher than the regulatory benchmark of 20%.

“Based on the aforementioned, we hereby maintain the ‘A-’ rating assigned to LAPO Microfinance Bank Limited”, Agusto said in the report.

BH findings revealed that many Nigerians patronize the microfinance bank to access credit due to their inability to secure soft loans from money deposit banks for their businesses. LAPO and other microfinance banks operating in the country, according to the findings, now reap from conventional banks’ strict and cumbersome loans application and approval process, with Nigerians daily trooping to them for bailout, not minding the huge cost.

LAPO MfB, which currently has 7, 233 personnel on its payroll, disbursed loans to the value of N140.4billion in 2016, to it’s over 2.9million customers scattered all over the country, with greater concentration on rural and urban poor women. With its skillful organizational ability, the company has been able to capture the informal sector of the nation’s economy.

According to its founder and Chief Executive Officer, Dr. Godwin Ehigiamusoe, LAPO has been able to put smiles to the faces of Nigerian men and women by lifting them out of poverty.
However, with the exception of many of its customers, many Nigerians do not know much about the firm, despite its popularity. Our correspondent finding revealed that despite the ease and convenience of getting loans from the firm, the road to repayment is laid with thorns.

Perhaps unknown to the management of LAPO, its customers and informed Nigerians in the thrift business employ the sobriquet ‘Ko mu le lantern, meaning ‘Your breast on hot lantern’, while referring to the company or its loan schemes.

Some of LAPO’s customers who spoke with BH explained the slang ‘Ko mu le lantern’, to mean the troubles associated with paying back loans from the firm.
“The day you collect a loan from LAPO is the last day you have sound sleep. Sales or no sales, you must pay back the agreed amount every week to the collecting agent or you are in deep trouble”, said Mrs. Bolaji Osolana, a trader at the popular Jankara Market in Ijaiye-Ojokoro, Lagos.

“It is either you pay up or face serious embarrassment and humiliation from collecting agents. You can no longer sleep well until you offset the loan.

“That is why the scheme was labeled ‘Your breast on hot lantern. Can someone who put her breast on a hot lantern have rest”, Osolana demanded.

To appreciate the process it takes to secure a loan from LAPO, our correspondent visited the Old Abeokuta Road office of the firm at Agege, and met with a female customer service official on duty. After introducing himself as a private school proprietor based in Oko-Oba, he was told that they only give women loans.

When BH enquired why the loan is given to only women, she blurted. In spite of persistent pleading, she refused to bulge, insisting, “That is company policy. We can’t bend the policy for you.”

She later asked our correspondent if he was married. When he answered in the affirmative, he was told to remove his name as the loan applicant and put his wife’s own. Right away, a set of forms was given to him to be filled and returned after they must have been completed.

Second step, they (our correspondent and his supposed wife) were told that after they have completed the form, they should come with the sum of N4, 000 as initial deposit and insurance premium of N2, 000, making it N6, 000 altogether, in addition to one guarantor.

The guarantor, our correspondent was told, is mandatory for individual borrowers, but waived for groups or cooperatives. He was told that as a first timer, he can’t get more than N60, 000, at 20% interest rate, payable within 32 weeks.
However, the facility is subject to upward review depending on the borrower’s assessment as far as liquidating previous loans is concerned.

The interest rate is however moderate, just 20%, compared to the close to 40% charged by deposit money banks. For example, our correspondent will pay back N72, 000 for the borrowed N60, 000 at the end of eight months. However, by the time the insurance fee and initial deposit are added, it will rise to 25%.

BH spoke with some customers of LAPO on their experience with the organization and their reactions are mixed. While some praised the initiative and vowed to continue patronizing it, the unlucky ones rendered tales of woes, vowing never to go near the organization and its numerous loan schemes.
For Mrs. Taibat Abass, a popular food vendor at Agege, said but for LAPO, she would have relocated to her hometown of Iwo, in Osun State, when she ran into financial trouble in 2017.

Radiating smiles on her face, she told BH how her food business almost collapsed in 2017 when the Lagos State government demolished her shop to make way for the Agege/Pen Cinema Flyover.

“My business came crumbling down in July 2017 when my shop was demolished for the Agege, Pen Cinema Bridge. After running around for some time, I was able to raise the N220, 000 as rent for another shop.

“That was when my problems started. Because I couldn’t raise more money to run my business, after paying for the new shop, people stopped giving me loans. I was in a dilemma until a friend introduced me to LAPO. I was initially skeptical, but since I had no option then, I followed her to the Agege branch of LAPO.

“After fulfilling all their conditions, I was able to secure a facility from them. And my fortunes changed for the better. I kill at least three big goats every day, not to mention the cartoons of fish and beef from the Oko-Oba Abattoir as complements.

“The secret is that you must pay back your loan every weekend, by making sure that you make so much money to cover the set target by the time LAPO officers come to pick the money”, Mrs. Abass said.

However, the road to liquidating the loan can sometimes be laced with thorns, as experienced by the unlucky borrowers. A foodstuff seller at the Agbado Market in Ogun State, Alhaja Bolatito Tajudeen, narrated her bitter experience in the hands of LAPO’s debt collectors.
“Initially, things were going well for me after collection a loan of N120, 000 from them. I used to travel far and near to buy food stuffs to sell to customers and pay back N8, 000 every week until the vehicle conveying my goods from Ogbomosho in Oyo State had a terrible accident before Ogere in Ogun State.

“Though I survived the accident, all my goods were destroyed in the accident. That was the beginning of my troubles with LAPO. After I failed to make the necessary payment at the end of the week, the company contacted my guarantor who led a team of debt collectors to my shop. I pleaded for more time to pay up and they were magnanimous. They gave me the grace of one week to pay up.

“Thankfully, I was able to raise N24, 000 from family and friends for the first three weeks. That is where the good news ended. After the third week, I couldn’t raise any money to continue paying.

“I was shocked to see a crowd at the front of my house the next Friday calling me unprintable words to come out. They brought a band with them who sang and danced in front of my house, calling me ‘Onigbese, (debtor); Ole (thief); Asewo (prostitute); O gbowo o lowo salo (She ran away with our money; Iyawo Olosa (Wife of an armed robber), among several derogatory abuses.

“That day, it was as if the earth should open up and swallow me up. The humiliation continued for several months until my embarrassed mother-in-law who lives on the same street as I am, came to bail me out by paying up the debt.

“Never in my life will I ever approach LAPO or any thrift agency for loan for that matter again in my life”, she said.

She added that she was even lucky as habitual defaulters get worse treatment like being locked up in a filthy latrine or even beaten up or arrested and put behind bars.
A debt collector working for LAPO who did not want his identity disclosed, said that they prefer humiliating their debtors than arresting them. He revealed putting them behind bars would be counterproductive as they won’t be able to trade to repay their debt.

“Though we sometimes go to our debtors’ shops or residences with security men, particularly policemen, we found that public humiliation is more effective in recovering loans.

“The shame strategy works better than arresting them, because they experience it in the full view of their friends, children and family.”

However, despite the challenges faced by some of its customers in the course of paying back their loans, LAPO has lifted many people out of poverty. Majority of the firm’s customers, who spoke with BH, said they had sweet experiences doing business with LAPO.