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By Ivana Mitrovic

Development finance professional with over fifteen years of combined experience in Europe and Africa. Passionate about emerging markets, Africa in particular. Since joining LFS/AH in 2009, dedicated his career to financial inclusion and impact investment, perceiving those areas as “tools” that can make a real difference toward sustainable economies and societies. Over the last fourteen years, Pawel held various managerial positions across the Access Holding network banks in Africa. Prior to that, he worked in strategic consulting in Europe.

Graduate of Finance and Banking at the Warsaw School of Economics and Master in Business Administration at IESE.

Passionate diver, chess player, ornithologist by interest and African art collector, he admires Roger Federer (on and off the court) and plays tennis himself. Curious by nature and resilient by character, he lived and worked in Poland, USA, Zambia, Liberia, Tanzania and Nigeria.

Great leaders are also not the high fliers who continuously try to outshine others. When you build a team, it is good to see their strengths as a complement to your weaknesses, not a threat to your position or authority.

Pawel, for a start, can you tell us more about AB Microfinance Bank Nigeria? How is the current situation in terms of growth and business results?

As an introduction to my reply, here is a quick flashback to 2021. Last year ABN recorded excellent business results. In brief, they are characterized by 56% loan portfolio growth, over 30% deposits growth, and C/I ratio reduction further by 8 pps. The results have been backed by ongoing geographical expansion towards Eastern Nigeria (ABN is present in eight states already) and well advanced, ongoing digital transformation process. All those developments have been reflected by EUR 5 million PBT (profit before tax), equity growth of 35% with 55% RoE. The quality of the bank’s second besides its people most important asset, a loan portfolio, stood at 3%.

Although encouraged by those results, we never rested on laurels but decided to keep the momentum going in 2022 with a similarly ambitious budget. Sadly this year, not only in Africa but around the world, we face more demanding macro-economic conditions that most business industries are vulnerable to. Consequently, the year-to-date 2022 figures are slightly less impressive than a year before; however still solid with over 15% GLP growth (July), good assets quality and over EUR 3 million PBT, which is just two percentage points behind the budget target. We are still positive regarding the second half of the year, which is usually characterized by higher credit demand: three new branches in new states, recalibrated Scoring Model, and an almost fully digital loan cycle are believed to fuel outstanding results and growth rates.

In the last few months, we have witnessed that most financial market players undertook profound transformations towards the complete digitalization of their services. How would you describe the digitalization process of AB Microfinance Bank Nigeria?

It is true: the whole world is becoming digital, and so does our business. The pace of the changes is accelerating. Populous, prospective markets like Nigeria attract more and more interest as well. Every day we read in the business press or industry publications about the platform-driven economy and FinTech-enabled marketplaces. This trend is visible especially over the last two or three years in Nigeria and is reflected by the appearance of numerous new types of emerging competitors. Among them, we see not only all sorts of Tech start-ups within payment space or “application lenders” but also fully fledged digital microfinance banks. Within the non-credit space, Payment Service Banks and telecoms enjoy banking licenses in the Central Bank’s move to liberalize the financial sector services and boost further financial inclusion. Social media, with a bulk of accessible information from which one may derive, for instance, credit worthiness or repayment capacity of a user, also start playing a role as one of the channels in the digital transformation of financial services.

All of that means that it is insufficient to compete only on simple product terms and conditions. The focus has moved towards fierce competition among different business models within the same industry. One of the main challenges for a technologically advanced and progressive, yet, rather traditional microfinance bank like ABN is that many competitive, experimental business models are not focused on profit. They are fueled by lots of relatively easily available venture capital funds from Silicon Valley and consequently have a big comfort of testing the market, customer behaviors, pricing and product offering without the pressure of focusing on profitable operations. Another thing is that number of those new competitors are not subject to any market regulations, which are in turn applied strictly to the banking sector players like ourselves. This furthermore constricts our competitiveness.

But now, let us narrow it down to the ABN. As much as we have not entirely revolutionized the business model, we have been cautious and observant, hence reacted on time to the ongoing industry changes. Since 2015 we have followed a path of gradual improvements to the way we do business, steadily speeding up the pace of adjustments over the last three years. Between 2019 and now, we have succeeded in developing, at times pioneering a few solutions that either increase productivity (loan officer field app) or lower the cost of loan generation positivity impacting the P&L (scoring based fast-tracked assessment) or lay the foundation for more distinctive future gains and grant us flexibility and comfort to speed up the changes to the business model when the time is right (chatbot, mobile app, tablets, digital data collection,). For now, right or wrong, in the pace and selection of various innovations, we combine four perspectives: (1) current and future market trends, (2) users’ preferences with their readiness to adapt, (3) internal capacity to develop/own/integrate a solution and (4) profitability of the bank. For now, no perspective significantly dominates the others.

However, if the circumstances are right and priorities vary, I think we are also well positioned (with necessary adjustments, though) to innovate at a faster pace in the future.

Where are you now in digitalization compared to the other market players? What can we expect from your institution further in digitalization?

Given all the business parameters that should be taken into account that I talked about earlier, we are well positioned to remain one of the industry leaders for a few years to come. In 2021 we regained the position of the second largest MFB with a national microfinance license loan portfolio-wise. Unlike some competitors, we managed the COVID crisis very well. Besides, we are ahead of a few important industry peers in terms of process automation, digitalization of the loan cycle and also geographical presence.

Within Nigeria’s traditional microfinance space, we are perceived as one of the industry pioneers in implementing new solutions. But we remember the industry is not limited to the traditional players and remain aware of gradually increasing disruption.  

Without going into details, two areas certainly require more attention/investment in the near future. One is to further enhance the ownership of a borrower by the bank, possibly stronger capacity to take centralized, good business decisions on loan origination at a lower cost. And second, to obtain the level of operational maturity when we can finally produce much more output with significantly less input, which means producing significantly more with less (OPEX exceeding 50% of the revenue and C/I over 70% are still heavy burdens overshadowing innovation efforts). Only then could we proclaim that the digital transformation has been a success.

Nonetheless, the big question is still what happens after a few years from now. This question is more difficult to answer because not everything that shapes the competitive landscape depends on us. For instance, will the Central Bank regulate all the FinTech players, and what scope of that regulation will be? Will they grow to be a real threat within our market segment? Will most customers at the bottom of the pyramid adapt quickly to the new business models, which often aggressively try to shape their behaviors rather than address their needs? How big will be the remaining niche of the traditional microfinance and financial inclusion gap five years from now? Will all the new business models successfully break through and prove eventually profitable, or will we start seeing a twilight of some unicorns and go back to the roots of the business with a healthy P&L or at least proven capacity to earn profit at its core? How deep are the pockets of the Valley investors, and how long will their patience to buy stories, not money-making businesses based on strong foundations, last?

Which essential skills must the leader have in times of high uncertainty and ambiguity? Can you share some rules you apply in your daily job as a CEO to adjust to a volatile environment such as Nigeria?

Since I was long in the previous sections, let me be a bit more concise in this one. In my opinion, apart from all the obvious elements of good leadership like team spirit, competence, integrity, knowledge or ability to inspire, one should keep in mind the three additional features:

• Sense of humor, wit and healthy distance to things and yourself – once a day, give yourself a chance to laugh to tears.
• Cold blood – a character trait that is simply indispensable to succeed through various crises, and numerous difficulties, help to stay resilient and focused on a target/goal/reward in the long term. This feature is essential when things go wrong, or the script does not work, which is so typical in developing countries. Also, the good thing is that, to a large extent, it might be trained.
• Great leaders are also not the high fliers who continuously try to outshine others. When you build a team, it is good to see their strengths as a complement to your weaknesses, not a threat to your position or authority. The best businesses have been built on brilliant people not on one person. It is about building a team with the most intelligent people you can find and inspiring them to believe in the mission together with you.

What would be the most important lessons you have learnt worth sharing with the others?

Hmm… You made me stressed now, this means that people really read that stuff.

Well, let me try this way, a few months ago I graduated from a business school. One of the important criteria I used in the process of the school selection was its mission that they truly believe in and try to embed across the entire two-year long program:

“develop leaders who strive to have a deep, positive and lasting impact on people, companies and society through professional excellence, integrity and a spirit of service”

Anticipating your question – am I such a leader? No, I am not, or at least not always or maybe simply not yet… But one of my professional dreams and goals is to be a leader characterized by those words one day.