[dropcap]O[/dropcap]ver the years, Auto finance, a veritable area of vehicle and Asset financing in the banking industry, has not witnessed much activity, due to absence of Original Equipment Manufacturers (OEM) in the Nigerian automobile industry. But with the emergence of auto policy, which eventually birthed some assembly plants in the country, the sector seems to be resonating.
One Nigerian financial institution that has played a major role in auto financing over the years is Stanbic IBTC Bank.
Recently, in an exclusive interview, Motoring World’s Lagos Bureau Chief, ROTIMI ASHER, engaged the bank’s Head, Vehicle and Asset finance, OLUKOREDE OLA AROWOJOLU, to find out what plans the bank is making to fill the yawning void being created by the Nigerian auto policy as well as other products and programmes lined up for the year 2017.
MW: Auto Finance is vital to the success of the nation’s auto policy and your bank is known to be a leading promoter of the scheme. Please, tell us how far Stanbic IBTC has gone?
AROWOJOLU: Thank you very much. Stanbic IBTC is a leading financial institution offering auto financing in the whole of the country.
In Stanbic IBTC, we call the product vehicle and asset finance, a product that opportune us to finance auto products. It is available for our personal customers as well as the corporate customers. Here we know the importance of auto finance, especially in complementing the nation’s auto policy in the sense of providing opportunities for customers to acquire brand new vehicles through bank finance.
In a sense, it is one of the flagships of our products. We have and will continue to do it.
MW: For how long has the bank been doing auto finance?
AROWOJOLU: From time immemorial; interestingly, I joined the bank over nine years ago and the product has been on before then. It has gone through several modifications. It comes with different dynamism to suit our target market. So for quite a while, the product has been available with the bank. And I can conveniently tell you, it is not less than ten years.
MW: That is fascinating. Given the fact that the new auto policy came into being only about five years ago, what motivated Stanbic IBTC Bank to launch into this unique area when it did? Or has it got to do with the bank’s vision?
AROWOJOLU: What happened was that, the bank identified a void in the area of auto financing and made efforts to ensure it is filled. I am aware that other banks also offer similar product. But in Stanbic IBTC Bank, we know the profile of our customers. We know what they need and essentially that is why this product remains available for them. And besides, we also take our time to diligently ensure we are selling the right product to the right customer. Perhaps this might be one of the reasons why the name Stanbic IBTC will always resonate with anybody who wants to look for auto financing.
Essentially, I also know that we have robust cordial relationship with almost all auto dealers in the country. Interestingly, we have kept that relationship going because we also notice that when you want to buy a vehicle, sometimes your first point of call is not always in the bank but to go to the vendors. To a large extent, we have also maintained good relationship with the vendors. There has been symbiotic relationship in that regard and we’ve had good testimonies as far as that is concerned.
MW: How many of these vendors or auto dealers have you done business with?
AROWOJOLU: We have done business with a good number of auto dealers. Interestingly, they are also widespread in Nigeria. We know the major as well as average players. And we relate with everybody based on what they have to offer.
Essentially, if they have in their showroom a good, reliable and durable product, which we can trust, based on what customers want, we are always there to support them. So in a way, as we are meeting the customers’ needs, we are also servicing the vendors, who are the auto dealers. We have done business with quite a lot of them in years past and we are still doing in business with them.
MW: Are there challenges your organization has faced in the process of offering this vital service to Nigerians?
AROWOJOLU: Auto financing is interesting. I think it is always going to be an opportunity. Currently, there is a general challenge that is being faced.
First of all, for you to give credit, you need adequate data and information about the person you are giving that credit to. In the aspect of information and data gathering, there are still challenges. But we are thankful for the advent of credit bureau and credit check that helps us refine customers’ behaviour and creditworthiness.
On the other hand, I also think the general economic wellbeing of people could also be a challenge. We noticed that the disposable income of people are now getting eroded and that has to do with general macros of the economy of the nation. Vehicles are getting more expensive, which means ordinarily what was in the reach of an average customer might be somewhat higher than what he or she could afford in the past.
We also noticed that products are getting fewer, because most auto dealers cannot access FOREX to import more products.
In turn, we know that every vehicle is as good as the amount of maintenance and after service available to it. When you talk of maintenance and after sales service, you will be talking about spare parts, where the vendors have to pay out of pocket to stock spares in their garages. These are but a few challenges for now.
And the fact that when it comes to finance, only recently did the Equipment Leasing Association of Nigeria manage to get through the bill, under which auto financing can now be recognized. There were other legal restraints they used whenever issues came up that bother on litigation.
It was pretty difficult for any of the financiers to claim back their assets where transactions didn’t go well in terms of recovery. But I believe we are at the end of the tunnel, and we are glad that some of these challenges are fizzling out.
MW: Please, enlighten our reading public, especially automobile buyers, how auto financing works?
AROWOJOLU: It is a simple product, though there could be instances with complexities. For us, as a bank, a major and vital aspect involves understanding the need of customers.
For you to have auto finance there are critical elements that must be in place. You need the customers; the reason we are all in business, you need the asset; the vehicle, the purpose for which you are giving the finance and the supplier, and you need the bank, which is going to provide funding.
All these elements need to be available and they need to be critically assessed to know how to properly combine all of them to have the customer smile and you, as a bank can also be fulfilled.
At Stanbic bank, we know our customers, we have a good database; and we profile them the right way. For those who are interested in this product, there is a benchmark for those interested to qualify. And some of these benchmarks help us differentiate between who we should offer the product to as well as those we should not.
Traditionally, what we do is check that if you maintain a salary account with us, we are happy to offer you the facility. Essentially, we ask that an initial deposit of as low as 10% of the cost of that vehicle be made and the bank will finance the remaining over a certain period. Usually, we go as long as 48 months to finance those vehicles for the customers and that is four years which I know is currently a rarity in the industry.
MW: Could you give us an estimated number of how many Nigerians have benefited from the scheme through your bank?
AROWOJOLU: That is a difficult question. We have offered this facility to quite a number of Nigerians. But I can’t give you the absolute figure right now. But if you want to go by the number of vehicles that we have put on the road for Nigerians, I am sure it is in excess of 6- 7,000 over the past four years. It ranges from passenger to commercial vehicles.
MW: Given the recent policies of the Federal Government as it affects the auto industry, how hopeful are you this year since your organization is very much involved in auto financing?
AROWOJOLU: Well, I believe it is a noble intention on the part of the government. As a financing institution, we feel that in every situation, there is an opportunity for us. What is important is doing whatever we do, the right way. So as for now, with the advent of the auto policy, which is encouraging local assembly plant, it is a fair development. And I believe as a bank, we will also be able to take advantage and play in that segment.
MW: What are your plans and target volume of beneficiaries of auto finance in 2017?
AROWOJOLU: Those are open to customers and prospects alike. It is imperative that Nigerians move around, and transport is a veritable tool in the development of a society. That is why it has not been off our radar. We will continue to offer this product. We are watching the market. We will continue to encourage and serve those who want to play in that segment as well as those who require finance. Our plan is to continue to offer finance for those who want to buy those passenger vehicles and to remain in that segment.
As you know, we are known for this product, and we promise to remain relevant.
In terms of volume, that can be determined by affordability of customers who approach the Bank. If there is capacity to repay, then there will definitely be appetite to offer the product.
MW: Does it mean you don’t have a target volume of beneficiaries this year?
AROWOJOLU: Definitely, there is a target. At some point, I want to believe you could be part of that target. There is a number that is robust enough to accommodate a qualifying customer, a customer with a repayment capacity.
MW: What is the number?
AROWOJOLU: We don’t want to disclose the number. In every endeavour, there has to be a target. That is why we are all here. There is a number that is reasonable and we hope we are able to achieve that, and we will be better than what we did last year.
MW: What really are your plans for 2017 in term of auto financing?
AROWOJOLU: Perhaps you are referring to what strategy we are going to adopt in selling the product this year. An essential aspect of what we do is in line with some of the automobile dealers. Already, we have campaigns lined up for them, and they can fine-tune their special activities that help both dealers and bank to sell higher than what we ordinarily would have done independently. And as we go into the year, we are going to roll out some of those campaigns. Again, we are also going to rely heavily on electronic media in the course of the year. We are also going to be dealing with a number of online auto marts. These are some of the things we are going to be dealing with in the course of the year.
MW: Certain critics believe that Nigerian banks are not in best position to offer auto policy with the right interest rate. What have you to say?
AROWOJOLU: Ultimately, every business is set up to deliver value/ returns to its stakeholders. We or other players in the industry will not be in business if we miss that. Profitability is determined by many factors. Generally, in today’s world, it is quite difficult to run a profitable business in our society.
We think about the overhead, cost of power, salaries of staff, customers who may owe you with the premonition of not even paying back. You find out that some of these things are also challenges to the survival of that entity. But interestingly, the conversation around rate has to do with where your funds are coming from. For us in the bank, our products are reasonably priced. We are above the market in terms of pricing, and our pricing is good. That is why we ensure that our customers always enjoy the product we serve to them. So as far as Stanbic IBTC is concerned, our interest rate is ideal for the customers.
MW: How do you see the future of auto financing in Nigeria?
AROWOJOLU: I believe with time, auto finance will be further advanced. We will go closer to what happens in the developed environment. For now, the industry is emerging. There are challenges on all sides. I know dealers have challenges, customers as well have theirs. But the fact remains that in most advanced countries; hardly would you find people buy vehicles with cash, even in their millions. They rely on banks to provide the finance. I believe with time, we will get there.
When the business becomes big enough to bankroll big projects, by the time we begin to see manufacturers, especially, OEMs coming to set up plants, I believe they will all ultimately impart on cost of acquisition of vehicles and encourage more people to take up credit facility to acquire the vehicles.
In most of the advanced world, it is not just the new vehicles that are financed; they also have secondary leased arrangement for the used vehicles. They have pre-owned markets. In other words, they add some more warranty for extended services plan around existing vehicles and they are able to send it to secondary lease market. There are instances where there are opportunity trade-ins.
These are the things that will happen as the market continues to grow and you get more advanced. So, I am hopeful that this market will get developed as we have more regulatory frameworks, as we have more supervision and monitoring, as we have better reliance on the collateral value of these assets. I believe we are going to get advanced and get there. It is a gradual process. We are in the right direction.