CoreStep aims to build a sustainable microfinance sub-sector
Competition presents to us an opportunity to keep innovating in the Nigerian microfinance market that is also fast growing.
In this interview, Abidemi Oseni-Oduntan, Managing Director/CEO, CoreStep Microfinance Bank, speaks on the turnaround of the Bank, competition in the industry, and the outlook of CoreStep. He spoke with Jide Akintunde, Managing Editor, Financial Nigeria magazine.
Jide Akintunde (JA): It is two years since the acquisition of CoreStep Microfinance Bank and the launch of the program you have led to reposition the bank. What is the current situation with the bank?
Abidemi Oseni-Oduntan (AO): Since the acquisition of the bank two years ago, CoreStep Microfinance Bank has undergone a comprehensive transformation program, which has entailed investments in technology, innovating new products, human capital development, growing the customer base and balance sheet size, and returning the bank to profitability.
We have launched our fully-digital banking through our fintech platform, called “Corebank”, to accelerate our financial inclusion targets and simplify our transaction processes. Corebank is a robust digital payment channel, but it is more than that. It is a digital marketplace for both CoreStep and non-CoreStep customers. An array of financial services is accessible there, including deposits, withdrawals, transfers, bills payment and collection, loans, investments, and MSME advisory services. The platform integrates mobile banking, web app, POS terminals, ATMs, as well as express partners’ cluster banking.
Unlike other digital or virtual banks in Nigeria, Corebank has a unique feature, which we branded “Zero Fee and Earn Rewards.” It allows anyone to make limitless transactions at no cost while, in fact, earning rewards when an account is opened, or transactions are performed. The benefits of the Corebank platform to its users include easy and unrestricted corporate account opening, zero transfer fee, zero COT or account maintenance fee on corporate account, free debit cards, free SMS alerts, competitive interest rate on deposit and investment, and no minimum balance – you are allowed to withdraw your funds to zero balance.
We have developed a number of bespoke products to serve various segments of the informal economy. With these products, we plan to help formalize the informal sector. Our model allows the integration of various associations and trade groups within the informal sector into formal financial services, ensuring continuous formalisation of such trade groups. Our other services, such as customised debit cards and proximity transactions, are deployed to promote value identity of members and the trade groups.
All of these have contributed to the tremendous growth of the bank’s customer base. From barely 5,000 customers we inherited when we acquired the bank two years ago, we now have over 150,000 active customers.
Our “Corebank Campus Ambassador” targets millennials in our tertiary institutions with financial services designed for their demographic. The service suite delivers on our strategy as a social enterprise. We provide free internet access for the undergraduate customers, give them extra income, and provide part-payment for their school fees.
Our Corebank platform enables smooth integration of customers with other fintech companies and financial institutions, leveraging our technology infrastructure.
JA: Congratulations on these initial successes. Why did you decide to invest in microfinance?
AO: We decided to invest in microfinance because our focus is not just to run a profitable bank. More importantly, we also wanted to make major contributions towards the building of a sustainable microfinance sub-sector. Investment in technology and social impact is a major underpinning for that. We also wanted to drive the agenda for the formalisation of the informal sector. This is both economically- and socially-inclusive. I have always wanted to facilitate this sustainable development agenda. Acquiring a microfinance bank licence provides the opportunity to deliver on these goals over the long-term.
JA: In the growth phase of CoreStep Microfinance Bank, what areas do you want to strengthen?
AO: The bank has successfully acquired its technology infrastructure and integrated into the regulated Nigerian instant payment and payment gateway switches. With our stable outlook, we are now focusing on the bank’s growth phase. Our plan for this phase includes reinvesting in our technology platform to support our growing customer base and transaction volume, and because of our pipeline of new products and services to be introduced to the market. We will be investing in our person-to-person (P2P) and MSME platform and in the administration of our artisan cluster services.
Enhancing our technology infrastructure would require substantial new investments. The bank’s treasury management, for supporting on-lending to our various cluster locations and for guaranteeing P2P lending on our platform, requires that we strengthen our capital base.
JA: Are you planning a funding round? If yes, would it be equity or debt financing?
AO: Yes, we are planning to raise fund. This is necessitated by our quite ambitious business model and targeted social impacts. We are looking at a couple of funding rounds, the first of which would be a convertible debt. In the second phase, during which we would be highlighting our sustainable development credentials, we will be doing equity fundraising rounds.
JA: It would appear that agency banking being offered by the large commercial banks, micro loans offered by various non-bank retail credit institutions, as well as financial technology firms in the credit space have increased competition in Nigerian microfinance. How is your business model responding to the market situation?
AO: You are right on the competitive landscape. But competition presents to us an opportunity to keep innovating in a microfinance market that is also fast growing. Our business model anticipates both the competition and growth dynamics, and our strategy is based on these realities. What we have achieved within the space of two years indicates we were spot-on with our business model and strategy. Yet, our growth phase will see increasing strengthening of both.
However, competition is not where we are channelling our energy; we are more focused on technology, innovation and sustainable impacts. These have driven our initial successes and are crucial to achieving our triple bottomline (economic, social and environmental) target in the future.
JA: Microfinance is development-oriented. Since you have mentioned your pursuit of triple bottomline, what development impacts are you specifically focused on?
AO: As we are all aware, financial inclusion, or access to financial services, is one of the main reasons of microfinance. This is an important area of impact for us and we are pursuing it with low-cost transactions and by investing in technology. Second, we are working on helping to formalise the informal economy. And third, we want to facilitate poverty eradication. We are tracking our results and shall be publishing our scorecards on an on-going basis.
JA: Where do you plan to take CoreStep in the next five years?
AO: The mandate of the bank is to grow its active customers to over two million in the next five years and become an MSME cluster digital bank in the in the country. Our brand is also very important. In this regard, we want to be reputed for innovation in the market. Part of this entails having a dominant business model that is recognised both in the market as well as in the development circle. These will make CoreStep a successful bank. Our long-term success will be underpinned by our development impacts and commitment to sustainability.