#13 post-2015
Johannes Preuß

Nigeria: Wonder Banks Debunked

Dubious banks take advantage of the poor in Nigeria. The mini-series “E-Go Better” educates farmers about the risks and chances of microfinance.

The global fight against poverty was the number one target of the Millennium Development Goals and continues to be a priority in the debate about a future development agenda. In order to achieve sustainable economic growth, it is best to include poor sectors of society in the economic process. Based on the successes of the Grameen Bank in India and the Nobel Peace Prize for its founder Mohammad Yunus, microfinancing has been seen as a key instrument for helping people improve their situations and achieve economic success – sustainably and over the long-term. Even violent conflicts supposedly decrease when people have more economic options. A critical reassessment took place after microfinance was included in several national policies. Results showed that microfinancing also entails risks for local people, especially when they are not well educated and dubious banks take advantage of their precarious situations. The Nigerian “E Go Better” mini-series is one initiative fighting the “wonder bank” phenomenon and helping people distinguish between trustworthy and unreliable financial institutions. Filmmaker Johannes Preuss directed the series and gave us an interview about the obstacles and successes of “E Go Better”.

DDD: Why is the subject of microfinancing so fraught in Nigeria?

The target group for microfinance are first and foremost smallholder farmers and small merchants who could really do something financially with a loan of 500€. This group often includes people who have had little formal education. So the entire concept of a bank – signing contracts, reading the fine print – is completely unfamiliar. The bank as an institution is quite foreign to their world of experience. That means they first have to work up the nerve to go into the bank in the first place, and then they are afraid they will be overwhelmed because they may not be able to read or write properly. There is a fundamental scepticism. Added to this is the fact that there was a huge problem with dishonest banks in Nigeria overall and in this region in particular, the so-called ‘wonder banks’.

DDD: So what are these wonder banks really about?

They are institutions that go by very alluring names, calling themselves ‘Power Finance’ or ‘Miracle Bank International’. Their posters feature thick wads of cash. They lure their customers with promises of huge profits, claiming they can triple their money in just a few months. This works so well because the first customers actually receive such sums. As long as the bank is bringing new money in, they pay out initially. It is like a snowball effect. People talk about the high profits and more people go to the bank. Then, when the number of people going to the bank to invest their money reaches a peak, the institutions simply disappear, leaving investors empty handed. It was a huge problem in Plateau State. An astonishing number of people were affected. Everyone has a story to tell about how they themselves, a relative, or a friend were cheated. It completely ruined some people. Some people had even gone so far as to sell everything they owned just to get some money. They brought this money to the banks in hopes of tripling it. A few months later the responsible parties couldn’t be found or people could not access their money any more for a number of other reasons.

DDD: Why did people deposit money first instead of getting a loan directly?

At commercial banks customers would have received a loan directly, but would have had to put up their property as collateral. But microfinance bank customers often don’t own anything. So instead of requiring some kind of property as collateral, they create a relationship of trust with the customer. They try to get to know people and test whether they can make regular payments. In practice this means that small sums are deposited over a defined period of time, and then paid out together with the loan. A person has to fulfil three criteria to even be considered for a loan. They need to be a bank customer, make deposits over a defined time period – usually three to six weeks – and leave a specific sum as a security deposit. It is not enough to just provide the security deposit; you also need to be a bank customer for a set amount of time. The bank also looks at the validity of your business plan. Ideally the lending officer visits the customer at his or her place of business or field to look at where the person intends to invest the loan money.

DDD: Why was wonder banking so successful?

Wonder banks used the influence of well-known people, especially religious authorities. Churches there function like a network for social messages. The pastor doesn’t just talk about god; he also talks about the latest news from around the city. These pastors numbered among those who got huge profits from the wonder banks at the beginning. They then spread the good news to their congregations. The pastors and imams are also very well respected and people believe what they say. Some of them are involved in this dubious business. There are two possibilities: There were those people who got involved unknowingly or were victims themselves. But there were also people who knew how the system worked, profited from it themselves, and used their authority to further the wonder banks.

DDD: How did the film series come about?

An European Union (EU) project implemented by the GIZ provided the financing for ‘E Go Better’. The EU is dedicated to conflict prevention in Plateau State, a federal state at the centre of Nigeria. The violence escalated there in 2010. Since then, there have been repeated attacks, like in May 2014 when Boko Haram set off two bombs at the centre of the capital Jos. The EU wants to promote the economy at the grassroots level to counteract the violence, so the focus is on microfinance. If this is going to work though, it is not enough to just strengthen the capacity of the microfinance banks (MFBs). The people in the region also have to understand how they work. In Plateau State, many people are very sceptical of banks. So we came up with the idea for a film that explains the ABCs of microfinance in an entertaining way and addresses the population’s fears.

DDD: How do you even start counteracting this kind of deceit?

We want to let people know that they need to differentiate between wonder banks and other financial institutions. We try to help the serious microcredit system regain more legitimacy. There is a pretty wide bandwidth of financial institutions. In addition to the wonder banks, there are also a lot of microfinance institutions supported by non-governmental organizations (NGOs) and which often follow charitable principles. The safest institutions for customers though are those registered by the government as microfinance banks. Customers can identify them because they are part of the National Deposit Insurance Corporation (NDIC) network and display the NDIC logo. The bank also receives a certificate it can show customers. Based on these two characteristics, customers can see what kind of bank they are dealing with. But we also encourage them to ask specific questions to determine the character of the bank they are in.

How does the deposit insurance provided by the NDIC work exactly?

NDIC guarantees that the customers of a bank that goes bankrupt are repaid from a fund. Only up to a specific sum though, which is not very high. But the amounts microfinance deals with are not very high anyway. So customers get all their money back up to that specified amount. This is especially good for poorer customers with limited savings. People who have large amounts of money in their accounts are at higher risk than smallholder farmers who only deal with much smaller amounts of money. I can’t really say whether this always works in practice and I am not familiar with the statistics. But legally these guarantees exist and in our film we explain the consumers’ rights.

DDD: So on the one hand there is the complicated world of the banks; on the other there is daily life in the rural areas. How did you manage to bring these two worlds together in your film? These financing models are pretty complicated. How do you motivate people to watch this kind of educational film?

We try to hold their interest through drama and humour. The film opens with a love story about a poor Christian farmer and the Muslim daughter of a local chief that draws the audience in. There are a lot of slapstick scenes in between where we counted on the improvisational talent of the actors. We did our best to make the film funny and incorporate plenty of scenes to make it lighter and more entertaining.

The humorous scenes are interspersed with ones in which we try to communicate complex content. Here we worked with animation and tried to visually show again how the systems work. We brought an animation artist from a film school on board who used very simple symbols to represent the abstract concepts.

DDD: How has the film been received? Have you been at the showings?

As soon as the film was done, we arranged for a series of showings. We returned to the communities in which we had filmed. The viewing figures were great: hundreds of people came. We showed the film and then quizzed the public to see how much of the content they had understood. There was also a smaller group that filled out special questionnaires. We offered DVDs, t-shirts and posters as prizes for participating in the quiz. Feedback was wonderful. The story was really well received and people laughed a lot. The series lasts an hour and people stayed until the very end to see how the love story turned out. Based on this enthusiastic response, the GIZ has decided to use the material regularly in training seminars with people who will be working in microfinance.

DDD: You worked exclusively with a Nigerian film crew. How was the experience?

We started by putting a core team together. There are two film schools in Jos. Although output is highest in Lagos, Jos is seen as the centre of the film industry. We went there and put up flyers. A lot of applicants responded, and we invited the best in for an interview: in part people with a technical background, but also conceptual and organisational. The core team comprised three people: an assistant director who worked on content, a production manager who took care of organisation, and a good camera man who helped us get access to the technology. I had already brought a lot of the most important equipment with me from Germany. We held a huge casting for the actors. We used radio stations, posted flyers at important universities, and approached acting groups directly. Suddenly there were around 1,000 people queuing up to audition. We couldn’t even look at them all. In making our selection, we paid less attention to getting professional actors on board and more to ensuring that they could realistically embody the role.

Photo: Movie Series E-Go Better

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