Successory Nigeria CEO, Dr Steve Ogidan, is bringing together a broad coalition of institutions committed to driving African growth through microfinance.
Microfinance, when implemented effectively and sustainably, has been credited with lifting millions out of poverty, addressing gender inequality, and providing access to finance that aspiring business-owners can not usually access from traditional bank loans.
Bangladeshi social entrepreneur Muhammad Yunus is credited with developing the microfinance model. His work in founding the Grameen Bank, providing loans to entrepreneurs previously denied access to credit, and subsequently lifting many South-East Asians out of poverty, won him a Nobel Prize.
In awarding the prize, the Nobel Committee commented “lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty” and that “across cultures and civilisations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.”
Subsequently, variations of the microfinance model were widely adopted across Africa. Growth was explosive. Data provided by Microfinance Information Exchange shows that from 2002 to 2012 the industry expanded by more than 1,300%. Gross loan portfolio grew from $600 million to $8.4 billion, and the number of microfinance customers from 3 million to 20 million.
However, even now in 2020, the majority of African microfinance institutions still lack the capacity and scale to make a significant impact upon local economies. “We discovered that out of about 1200 microfinance banks in Nigeria, the majority are one unit banks that struggle to build capacity,” says Dr Ogidan, highlighting the challenge facing the industry across the continent.
Successory Nigeria CEO Dr Steve Ogidan
Solving Africa’s Entrepreneurial Bottleneck: A Priority for the Continent.
As Africa’s population growth surges, entrepreneurs struggle to access the capital required to scale their businesses and create jobs.
The impact on African economies is significant; Only 1% of micro-enterprises that have started with less than five employees have grown to employ 10 people or more, and Africa’s SMEs are estimated to face a credit gap of $135 billion.
Across the continent, the statistics show both how reliant African economies are on SMEs and the challenges that entrepreneurs face in developing job-creating businesses.
SMEs are estimated to be responsible for over 80% of employment in Africa. Small companies account for more than 60% of the continent’s business-to-business spending, and over 80% in Nigeria, Kenya, Tanzania, and Ethiopia.
However, many parts of the continent have the highest failure rates in the world for new businesses. 71% of new companies launched in South Africa, for example, will have closed within their first year.
Furthermore, one in three Africans, 422 million people, continue to live below the global poverty line.
While economies are growing across Africa, populations are often growing even faster. According to the Brookings Institute Nigeria is expected to lift nearly 10 million of its citizens to middle-class level over the next decade. Relative poverty will decrease by almost 3 per cent. However, the absolute number of poor people in Nigeria will still increase by some 20 million due to rapid population growth.
A study by Prof. Quanda Zhang at RMIT University showed that even a small boost to microfinance funding could lift more than 10.5 million people out of poverty worldwide.
However, as Prof Zhang explains, creating the proper enabling environment for success is just as important as providing capital; “Access to credit enables poor people to become entrepreneurs, increasing their earnings and improving their quality of life.
“Many lenders accompany their small loans and financial services with peer support, networking opportunities and even health care to improve their clients’ odds of building a successful small business.”
While Africa’s challenges are complex, a strong argument is made that increasing access to capital, within a properly regulated and structured market, can have a significant impact on job creation and tackling extreme poverty.
In order to address the challenges facing Africa, Dr Ogidan has built a broad coalition of partners and clients able to impact Pan-African development positively.
In an interview with AfricaLive.net Dr Ogidan said “One of our most significant achievements is that we have turned our competitors into collaborators,”
“Today, Successory Nigeria Ltd is one of the loudest voices in microfinance development strategy in Africa.
“Through our portfolio of different programs, we want to tackle unemployment, enable access to finance by being a frontier for microfinance and as a result, promote financial inclusion.
“We also want to reverse irregular migration by creating opportunities in Africa for youths.”
To create opportunity through increasing access to finance, Dr Ogidan and Successory Nigeria are working with the most influential development finance and microfinance organisations across the continent.
Successory Nigeria’s Key Programmes and Partnerships
Central Bank of Nigeria (CBN) and the Chartered Institute of Bankers of Nigeria (CIBN)
Central Bank of Nigeria
With the majority of Nigeria’s 1200 microfinance banks just one unit banks unable to build capacity, Succesory Nigeria saw the solution in education and skills development.
“We started working on a certification program under the leadership and sponsorship of the Central Bank of Nigeria and the Chartered Institute of Bankers of Nigeria.” says Dr Ogidan
“People who wish to go into managerial positions now need this certification.”
Nigeria Incentive-Based Risk Sharing System
Nigerian farmers benefit from NIRSAL’s lending facility
“Our biggest project currently is Programme Management for the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, NIRSAL.
“We have over 550 staff employed for this project in 37 locations across Nigeria. We monitor the project, we build the capacity of farmers and organise them into geo-cooperatives to enable them to upscale their businesses and have access to different levels of financing.
“Under the leadership of the pioneer and current CEO of NIRSAL, Aliyu Abdulhameed, we have been able to rapidly cover the 37 states in Nigeria with effective project monitoring, reporting and remediation tools that are second to none in Africa.
“We also supported NIRSAL to set up one of the biggest Microfinance Banks in Nigeria; The NIRSAL MFB.”
School of African Microfinance
The kenya based School of African Microfinance is building capacity in the sector
“I am the current Course Director at the School of African Microfinance, and I am working to develop microfinance capacity across Africa.
“We always start with gap assessment by examining challenges in the market and then we design a curriculum to fit into that gap and then we deliver it.”
The School of African Microfinance is a Kenya based institution. Its role is “to see Africa prosper through increased financial access to micro-entrepreneurs through training microfinance institutions to grow while serving their customers.”
Development Bank of Southern Africa
Africa’s development banks fund social and economic infrastructure development across the continent.
“We work on a certification program for the development of financial institutions in the region. The program is divided into three different levels which cater to the specific needs of our partners.
“In the last three years, we have trained over two hundred and forty development bank practitioners in Zambia, South Africa, Ethiopia, Kenya and Nigeria in that program, and it has proved to be very successful.
Association of African Development Finance Institutions
AADFI rolls our training programmes across the continent
“We look at institutions such as the Association of African Development of Finance Institutions in Africa based in Abidjan, Côte D’Ivoire, and we design programs in line with their specific needs. Then they use their members to test the curriculum we made for them, to roll out across Africa.
“We designed the Professional Certificate Programme for Development Finance in Africa.”
Challenges run deeper than access to funding
The challenge for Africa’s emerging entrepreneurs goes beyond access to funding, however. Many small businesses, or successful medium-sized family-owned enterprises, lack the capacity or relevant experience to plan and implement a working growth strategy.
Only about 1% of African micro-enterprises that have started with less than five employees have grown to employ ten people or more.
At the other end of the scale, Africa is home to 400 home-grown companies with revenue of over $1 billion and, on average, they are growing faster than companies of a similar size anywhere else in the world. In a market of over 1.2 billion people, there is almost unlimited potential in unlocking value and scaling-up Africa’s medium-sized businesses.
“We discovered that often time’s enterprises across Africa believe that funding is their primary challenge,” says Dr Ogidan.
“However, our experience has shown that beyond funding, building capacity is a significant issue. We have enterprises that have limited ability and a clear understanding of how to manage growth.
“The enterprises we have worked with across Africa often succeed as first-generation enterprises, but moving from the first generation to the 2nd generation can be a challenge. They cannot move beyond a certain stage of growth and particular capacity. To move from one step to the other, they need additional capacity. Managing growth is, therefore, a significant issue.”
It is in unlocking hidden value and creating robust strategies for managing growth that Successory Nigeria can provide solutions to established African businesses.
“We operate in West and East and Southern Africa with our strategic partners,” explains Dr Ogidan.
“I believe that enterprises that are looking to scale up must grow beyond the capacity of their CEOs.
“I am a firm believer in life- long learning and have been building my capacity by attending business courses, like the one I completed with the Harvard Business School. In my view, it is a great way to expand our knowledge further and broaden the horizons.
“An in-depth look at our clients revealed that most of them were family businesses. The challenge with family businesses is that there is a thin line between nurturing the business and growing it.
“Families tend to want to hang on to their companies and can be resistant to growth strategies that will see more people directly involved in them. This reluctance to let go is why I teach students that it’s better to have 25 per cent stake in a five million dollar company than to have a 100 per cent stake in a firm worth ten-thousand dollars. Being a bit-part owner in a company worth way more gives you time to focus on strategy.
“Being the be-all-end-all of a small company drains you and makes you far less money.
“We have convinced lots of owners to loosen their grip on their business. Loosening their grip does not mean handing over the enterprise, but allowing in more expertise and funding.”
High Returns Await In Untapped Markets
Dr Ogidan advised Shoprite on their expansion into the Nigerian market
Despite the complex challenges involved in scaling African businesses, Dr Ogidan is bullish about the continent’s overall growth prospects. He believes many foreign investors are missing out on opportunities due to an inaccurate perception of the continent’s risk profile, saying “I will admit that there is a high risk, but the return is much higher.
“There is so much to gain because the market remains highly untapped. We have challenges in electricity and social infrastructure that can be solved by investments.
“I can bet that investing ten-thousand dollars in Nigeria can get you a 100 per cent return within a year. A return like that for that kind of initial investment is not possible in Europe. I remember being involved as Shoprite sought to make a foray into Nigeria.
“They had concerns about what they perceived as the inability of Nigerians to afford their products. They estimated that only 35 per cent of the country would be able to buy their products and thought of aborting the mission. I made them realise that 35 per cent of potential buyers in Nigeria was more than 100 per cent of potential buyers in South Africa.
“The rest is history because the retail giant has over a hundred branches all over the country today.
“I have travelled a lot in my life and can confidently say that Europe is saturated in terms of opportunities. Africa, on the other hand, is full of emerging industries that are investable and profitable.
“Organisations that don’t look at Africa will end up losing big time in the end.”