Banking today don’t really need all the brick and mortar to be effective – Asupoto

Omotayo Asupoto, managing director, Lukefield Finance Company Limited, is a thoroughbred banker with over 30 years experience in the financial sector. In this interview, Asupoto, popularly referred to as ‘Aunty T’, spoke about the economy, banking and finance; and how Lukefield has managed to increase its capital base from N100 million to N2.9 billion within 7 years of operation. Excerpts by JOHN SALAU:

The economy is picking up at the moment; we’ve seen stable Naira, and then inflation is also slowing. However, Nigerians are not feeling that impact. So, what do you think is responsible for this?

Well, you’re right to say Nigerians are not feeling it, because we all go to the market and we know. But you see, these things will take time. The economy is moving now in the right direction. Interest rates that went all time high a few months ago have stabilized and we’re seeing it come down. The same with FX – the exchange rate has more or less stabilized. In fact, what we found was when the exchange rate was going up, people were moving from Naira deposits or investments into dollars. But now that there’s stability, people are coming back. People are coming back and exchanging, back to say, oh, please, I want to come back into Naira. So, all these things, and from infrastructure that the government is trying to improve upon. At the end of the day, I believe that things will get better. And we’ve also seen it in the kind of transactions that we’re seeing from our customers because like this time last year, the oil and gas industry wasn’t really. But now we’re seeing that, they’re getting more help. People that are like the subcontractors of the big oil and gas companies. So, we’re seeing that improve and our own take is that we’ll see further improvements. At the last time, Monetary Policy Committee, the NPR rate was dropped by 0.5. So, we believe that it may even drop further in the next couple of meetings. And so, we’re also reacting in terms of the interest rates and all that. So, I believe that things are going to improve.

The Nigerian financial space is very competitive, especially with the evolving regulatory climate; so, what gap is Lukefield filling in this market?

The financial industry is very vast. There are different players in the industry. So, we call them sub-sectors. And the ones we work on are the ones that are regulated. And our main regulator is the Central Bank of Nigeria. So, in that market, it goes from the commercial banks down to microfinance banks, even down to the BDCs and all those are in the market. So, our own license, where we play, is the finance company sub-sector. And that sub-sector plays a very vital role in the whole economy. We are sandwiched between the big banks and the microfinance banks. So, there are certain things that our license allows us to do, and there are certain things that our license doesn’t allow us to do. Let me start from what it does not allow us to do; we’re not allowed to trade in foreign exchange. We’re not allowed to take deposits, which mean that we’re not allowed to take current account monies or savings account. But we’re allowed to take funds from customers. In our own sub-sector, we call it borrowings; we borrow funds from the customers, and then we lend to the people that need it. And then, of course, we’re not allowed to do things that our license doesn’t specifically state, like stockbroking, project management, and all that. The way I try to differentiate it is that if you remove those three broad things from what banks can do, then we can do every other thing that banks can do – whether it’s in consumer loans, leases, factory, invoice discounting, retail loans, every other thing we’re allowed to do apart from those loans. So, what happens in our own climate is that the operations are relatively small and compact, decision making is fast. And then we also focus on the SME subsector. I know the SMEs; they don’t have all the collaterals of this world and every other thing that big banks will ask for. We’re able to meet the needs of those people in terms of understanding their business, in terms of speed of doing transactions, and of course in terms of just holding them to improving their business. That is really the key sector that we focus on, and that’s the value that we bring to our customers. The speed, the one-on-one interaction, and just being able to meet their needs and understand the peculiarity of their business. If I may also say, if you go to a big bank and you want to take a loan, and they’ll be asking for your financial statements, audited account, and all that. Or even when our customers don’t have audited financial statements, we’re able to take their bank statements, and understand their business from their bank statements and make judgments on whether we want to finance those type of businesses or not. And then looking at the other side of the balance sheet, which is the borrowings that I talked about, the funds. Because we don’t take current accounts and savings accounts, so our cost of funds is a bit higher than banks. So, for designing customers who have funds and want to invest their funds maybe for 60 days, 90 days, 180 days, instead of putting such funds in banks at 5% or 3%, or even at zero current account, they come to us and they give us such funds. So, on both sides of the balance sheet, we have our target customers who see our value in what we do and are able to bank with us.

Your company plays in the finance sector; however, that part of the market seems highly restricted by regulations. So, where is the space for growth in the sector?

Thank you very much. Let me take the restriction and regulation. My earlier background is that of banking. I spent 27 years in a notable commercial bank. So, we’re used to the regulation. We’re used to doing things within the ambit of the law. And even when you do that, you still make your money, because if you do banking very well, you are doing intermediation between people that have excess funds and people that need the funds – you’ll always make your money. So, the issue about risk – what we do is, as I said, because when you’re lending, the critical thing, apart from even financials, is the character of the borrower. In selecting the people that we do business with, it’s not everybody that we do business with.

We watch their character and as I said, from even interacting with the customers, you will know people who are credible and who would pay back your funds. There are times when things happen, you know, someone is very forthright and all that, but business just goes belly up – you always have that. My former boss, God bless his soul, used to say that, see, business is about risk. It’s just being able to dimension it.

So, you will find the Judas amongst the 12 disciples. It’s always there. But what do you do to ensure that at least the other 11 are very, very safe? So, we have very robust risk management framework. We have specific credit approval limits. It’s not just that someone just wants to do, I just want to do a loan for you, I like your face. No. So we have a credit policy guide that guides us, in who we can lend to, what we can lend, the amount we can lend to someone, the sectors we can finance, even sectorial limits. Because I can’t give all my loan – total loan portfolio to maybe two sectors, for example. The board has set limits for each of the sectors to say for this sector, it can’t go below, beyond this percentage. And we abide by that because all the corporate governance rules, we abide by. We have quarterly board meetings; as I said, we send reports to CBN every month.

They come and examine us. We have auditors. It might interest you to know that our auditors are one of the big four. Ernst & Young are our auditors, and that’s because we decided to do the business very well. So, all these things guide us to ensure that even though there is risk in the market, we dimension our risk properly, and we decide who we want to give loans to, within the system.

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As a finance company, what are you doing differently to stay on top?

As I told you earlier, my own license allows me to do even up to 20 percent. So, I can do loans for 50,000 to 580 something million as I speak, which might even increase further as I close 2025 and my shareholder’s funds increases – I have that wide range. But, in life, you can’t do everything because I’ve seen a customer that came one day and said, oh, let’s partner. He’s into on-lending too. So to say, oh, you have the money. We can partner and I’ll be giving market. I said, see, let me stay on my loan. You know the market. I can give you loan. You can go and give the market people. But, I don’t have the structure to manage market women. So, even though the license allows me, if I go into any market today and I want to start doing 50, 000; 50,000 loans, I haven’t done anything wrong as far as central bank. But do I have the, as you say, unique selling point? Do I have the manpower? Do I have the infrastructure to do that? No. So, I would rather play within a niche and ensure that, I’m still adding value to the customers.

So, which side of your business drives the most growth for you?

I’m an accountant, so I always talk balance sheet. So, let me talk from the liability side of the balance sheet, which is the funds – people that give us funds; over 75 percent, 80 percent of our funds come from retail. This is our seventh year, so, over the seven years we’ve had people who’ve believed in us and given us funds. We also have, because as I said, we’re regulated by central bank, so the minimum amount we can take from any individual is N50, 000. So, if you want to do business with us and you bring N20, 000, we may not be able to. The sector has been dimensioned that that strata of the population is dealt with by the microfinance banks. But for us, our license says 50,000 minimum. So, we have also a lot of people that give us in the 1 million, 2 million range, civil servants, bank employees, even people who are doing business, that give us funds. So, from that sector of the market is really retail that we get our funds from. Now going to the other side, which is where we loan monies out. We have across like 13 different industries, from manufacturing to trading to the same retail, oil and gas, logistics, so different sectors.

Now, what we’ve also done as Lukefield is that currently, because CBN is working on it, but let me tell you what the current thing is. The regulatory share capital, capital that you need to start this business is just 100 million. They’re working to increase it, but it’s still, as we speak, 100 million. Now, CBN says for you to lend money to Mr. A or company A, the maximum you can lend to one company or one individual is 20 percent of your shareholders’ funds. So, if you just stick at 100 million, 20 percent is just 20 million. So, very early in this business, we realized that that won’t take us anywhere because we want to build a legacy; we want to do the thing properly.

So from year two, we started increasing capital. So, as I speak to you now, our share capital now, our shareholders’ funds is 2.9 billion. So that tells you that we can loan to one individual up to 580 million.

We’re able to also play in the upper band of the market, even try to shake some of the banks somehow, because some of their customers come to us, and you’ll be wondering why would they come to you, and not to a big bank. But as I said earlier, maybe they are processing their loan with a big bank. It’s taking them forever. Or at times they say, okay, we’re still working with the banks, but please, we need this money for this short period. We’re happy to give them. When they have their money from the banks, then they pay us back. So we’re able to deal with such companies, even as we are currently.

How have you managed to strengthen your capital base in this short period of time?

Okay, let me also give you a bit of history. When we started, because when you apply for a CBN license for this business, you drop your 100 million to CBN, and they give you an approval in principle for six months; and they say, in these six months, get some other monies, hire staff, buy a computer, buy furniture, rent a space. So, we did all that and brought in like additional 50 million to do all that. But when CBN gives you your final license, then they return your 100 million to you. So, if we had offset that 50 million, we wouldn’t have done anything wrong, because you can actually do that. But what we decided to do was to retain that 50 million in the business and start working. But as I said, by the time we started, we realized that N20 million loan, where will it take you? So like year two or so, we increased capital and then for the first four years of the business, we didn’t draw any dividend. So, everything we’re making, we’re putting it back into the business. And I think like year four or so; then we did a second capital call. As I speak to you today, our share capital is one billion. But our shareholders fund, which includes all the reserves and everything, is 2.9 billion. So, we were just preparing, because we knew that someday CBN would increase the capital base for this sector.

You mentioned offices in Lagos and Abuja. Is there a reason why you have kept the two branches?

First, the truth is, banking today don’t really need all the brick and mortar to be effective. The reason why we put a branch in Abuja was closeness to those civil servants that I spoke about, because that is really the focus in Abuja.

In Abuja, we don’t really do SME and all the other; we do all that from head office. So that is really the reason. But we know that as we grow, we might have maybe another office on the mainland, for example.

But in terms of going to Port Harcourt, Kano, that’s not in the works. But the kind of things we’re looking at is, our license is not restricted. As I said, we like to work within regulation. So we’ve seen times when our customers need other things like wealth management, serious financial advisory that we are unable to give. We’re looking at that, because we have a five-year strategic plan, which started 2024 and will end 2028. One of it is that we want to buy into some other business lines, like asset management. Asset management requires a SEC license. So we’re looking at that. We’re also looking at, probably, by 2028; we’re still looking at it. Maybe we can even transition into a commercial bank because, you can go to CBN and say, I’ve held this license for this long. I want to transition into something better. That’s where partnership and collaboration will come in, because we’ll have other people who are like-minded.

Finally, our readers would like to know more about you (Aunty T)?

I’m a thoroughbred banker. That’s all I’ve done all my life. I started banking in Fountain Trust then. And then 1993, I moved to Guaranty Trust Bank. And I was in Guaranty Trust Bank until 2018 when we started this place. And in Guaranty Trust Bank, I was fortunate to work in different departments of the bank, starting from operations. I was at one time the CFO of the bank, headed risk management and operations, whether it’s funds transfer. And then I also did marketing for a very short period. So, I have this very vast experience in all these things. And before I left the bank, I also had the opportunity to sit on the board of one of the subsidiaries in Liberia. So that also prepared me and helped to set up everything that we’re doing in Lukefield. So for me, that’s all I’ve known, because my life has always been regulated by the CBN. And also, one has learned to – these are the rules, just try and obey the rules.