“And with your great help, we will be able to grow and help more poor people,” Edet says with a beaming smile.

I smile and ask him about his client base. His new microfinance organization, launched just 3 months ago in Lagos, Nigeria, already has acquired 300 micro-depositors. Impressive.

A typical micro-deposit customer might be someone who sells yams on the side of the road in a wheelbarrow. He picks the yams up outside the city, wheels them to what he thinks would be a good sales corner and then spends a long day trying to sell yams. In a day, he can make about 500 Naira, or about $4. After daily necessities, he might have fifty cents or so to save. Save for a month and at the end, maybe he can buy a new pair of pants or shoes.

So, it goes to reason that 300 micro-deposits does not translate into a lot of working capital to run a micro-finance organization and make micro-loans. Edet needs to find some capital injections.

Nigerian microfinance organizations don’t have a lot of options for start-up capital. According to an analysis done by the Nigerian Central Bank in 2005 (translation: read these upcoming numbers with a couple of very large grains of salt), 65% of economically active Nigerians use the non-formal banking sector which includes microfinance institutions, moneylenders, friends, relatives, credit unions, or mattresses for their banking solutions.

Historically, these institutions have had limited success, mostly due to lack of loanable funds, especially the mattress. The Nigerian Central Bank report indicates that a Nigerian community bank needs $420K in operation funds minimum to provide effective banking services to its clients. The 2005 average capital base was one tenth that.

A few lucky MFIs get start-up capital from international microfinance funds such as MicroPlace or international development agencies such as USAID. The rest pull capital together from local investors to get enough start-up, but this is usually much more limited. And how does the Central Bank propose that banks should fund the difference? “The banks are expected to engage in aggressive mobilization of savings from micro-depositors to shore up their operating funds.”

Edet shows me a deposit book. It reminds me of when I was a little kid, maybe 10, and my dad and I went to the local bank to open me a bank account and I got a deposit book to record all my transactions. My dad wanted to teach me the concept of savings and compound interest so had taken me with all my allowance and lawn-mowing money down to the bank to open my first bank account with me. I think I had about $5 saved up and the banker seriously accepted my money and put a stamp in my book to signify my deposit. And my dad’s plan worked. I remember swinging on the swings thinking about saving money and how soon I would have $100 and then I would be rich!

I also remember the gold plaque on the bank’s wall that proudly declared this bank was FDIC insured. My account would be insured up to $100,000, a sum so enormous that I couldn’t picture who would ever go over that amount. They explained to me how having a stamp in this little book was as good as having my money with me and it was safe here. The government guaranteed it.

In most rural Nigerian villages, dads don’t take their kids to the local bank and teach them that this is a safe place to put their money and the value of compound interest. First off, there probably isn’t a bank branch in the village (The Nigerian Central Bank reports that, on average, there is one financial institution outlet to 32,700 inhabitants in Nigeria. In the rural areas, it is 1:57,000. Just as a comparison, there is approximately 1 ATM for every 650 people in the US). And then there isn’t a big banking culture. For the villagers willing to take the required leap of faith and give their hard-earned money to a financial institution, they can choose between the couple of banking, microfinance, and other rogue financing groups who come to the village about once a week or so to collect deposits. And, every once in a while, one of these guys bikes off into the sunset and you never see your money again.

In an environment such as this, it must be a tough sell to start up and get depositers. But he is optimistic. “Yes,” Edet beams at me, “I am sure with your American assistance, we will be able to do great things!”

I have to give the man credit. He needs capital and he is not going to waste the opportunity of an American sitting in his office on small talk.