Credit Discipline, Support Services Remains LAPO Microfinance Bank’s Watchword

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Godwin Esewei Ehigiamusoe
Dr. Godwin Esewei Ehigiamusoe, Founder LAPO.

The Lift Above Poverty Organisation (LAPO) Microfinance Bank has consistently remained a force to reckon with in the money market especially the microfinance industry for its undisputable performance to customers and the society at large.

Lift Above Poverty Organisation (LAPO), a non-governmental organization committed to the social, health, and economic empowerment of the poor and vulnerable, with greater concentration on rural and urban poor women in Nigeria, and in some other countries of the West African Sub-region.

The Founder of the Lift Above Poverty Organization (LAPO) Microfinance Bank Limited, Dr. Godwin Esewei Ehigiamusoe PhD, who is influencing lives positively, while delivering the LAPO Journey story stated that “Besides our commitment to low-income people, our emphasis on credit discipline has been praised by many and of course, loathed by some. People appreciate the support services we make available to our borrowers and our explanations of borrowers’ need to take their repayment seriously. Many others believe that LAPO’s survival for over thirty years is due to our effective risk and delinquency management.

…Excerpts from “Touching Lives: My LAPO Journey” by Godwin Ehigiamusoe PhD

LAPO’s Contribution To Economy: “If not for LAPO’s existence, many people would think that microfinance began in Nigeria with the microfinance policy launch in 2005.” This was what a lady, a microfinance NGO practitioner in the northern part of Nigeria told me in admiration. Other early microfinance practitioners believed that “LAPO ‘saved’ microfinance in Nigeria put the nation on the global map of the practice.” Though we do not gloat over our accomplishments in the sector, the assertion is correct to the extent that despite the obvious challenges in our operating environment, LAPO emerged as the only institution among the early microfinance institutions that were able to scale up.
One reason why we survived was because of our capacity to deal with repayment delinquency, the deadly virus of early lending institutions. Like other microfinance NGOs of the period, LAPO was in a miserable state with poor portfolio quality, weak financial performance, and low staff morale. We struggled with delinquency and threw incentives at loan officers to improve loan repayment, but there were no significant results. The oldest branch in Ogwashi- Uku was a mess, and we ended up closing the branch in Ehor and later merged it with the Ekpoma branch.

Step LAPO Took To Control Situation: Like most poorly performing lending institutions, we blamed the borrowers. “Benin women do not like to repay loans,” many of the loan officers and branch managers would bemoan. Staff morale was at its lowest ebb. I needed to act quickly.

Fortuitously, ASA, a Bangladeshi microfinance institution, was acting as the International Technical Service Provider to UNDP’s microfinance support project with LAPO as a participant. The first step was to give adequate re-orientation on managing viable microfinance institutions as well as on loan portfolio management. I used the analogy of a “mirror of blame”.

Loan Repayment Challenge: Dr. Ehigiamusoe stated that “In repayment challenges, lending institutions are not to turn the mirror of blame toward delinquent borrowers and endlessly blame them. I insisted that we turn the mirror of the blame on ourselves. There were many institutional and behavioural flaws we needed to address. For instance, essential credit administration functions were highly centralized at the head office. Approval for all loans was given only by the head of operations. The result was that field credit staff were alienated from the entire process and therefore demonstrated minimal loan recovery commitment. Loan utilization monitoring was scanty and staff training did not prioritize delinquency management.

The Founder’s Aim: “I wanted LAPO to be like the outstanding institutions in Asia. The major discernible feature of these successful Asian microfinance institutions was effective credit discipline. In response, we began a decentralized loan management process with detailed operational procedures, effective credit group management, responsive product offerings, and staff and client training on delinquency. We trained credit staff to engage clients in a manner that supports good loan utilization and repayment. A good outcome of this was the case of a brilliant loan officer who, while putting a credit group together was confronted by a distant cousin of mine who wanted to be registered just because she “knew” the managing director of LAPO.
“Eseiwi ( my given name) is my brother,” the lady declared with fanfare and then narrated some childhood pranks and games she alleged we had together. When the young LAPO credit officer couldn’t take it anymore, she turned to the woman and said, “Madam, you know my director too much, but I will not register you in the group just because of that.” A vintage LAPO credit staff. She saved
herself possible future trouble in delinquency from the overbearing lady.

LAPO Client’s Forum: He said “At every forum, we organized for clients to interact with LAPO officials, we used several innovative ways to communicate the new direction on credit discipline to clients. We deliberately challenged the entrenched culture of irresponsible borrowing and abdication of repayment obligations in our environment. Our position, clearly explained to clients at pre-loan training sessions, was that we were committed to assisting them to get funds for their businesses. Since clients were unable to get loans from commercial banks, LAPO would serve as an intermediary to get the funds for the clients with minimal hassles. We would make loans available to them in any amount and at the time needed. The clients were, however, to owe us the following obligations: proper utilization of the loan; no fund diversion complete repayment of loan amount with interest. To support proper utilization, we delivered pre-loan training; and to deal with adverse occurrences that could compromise the ability to repay, we introduced insurance cover. For instance, all clients were provided with fire insurance cover. Early on, we were able to segregate the complainants from the well-satisfied clients, the latter being the majority.

Complain And Resolvement: “We identified the complainants with the following: professional loan seekers without reliable enterprises; loan diversion to non-revenue purposes such as the construction of family house project; and persons not really in need to care for their family. Those who testify that they “enjoy LAPO” are usually hard-working women aware of their family obligations. Widows stand out in this group, and we are glad we meet their needs.

LAPO Breakthrough: By 2004, LAPO Microfinance Institution could compete with its peers anywhere in the world. It was delivering superior performances in revenue and portfolio quality. The latter attracted the most attention of stakeholders in the emerging microfinance sector. By 2018, LAPO was meeting funding needs of over ₦14 billion monthly. Of course, we received some flak for our approach
to credit discipline.

In Benin City, LAPO’s approach is called Giegba (let it be complete), said to be the refrain of our loan officers to defaulting borrowers. The word in this context means “ensure the installment amount is complete.” There are many stories about our approach to credit discipline. The level of absurdity of these stories depends on who tells them and for what motive.

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