- Repositioning MFBs for Real Sector Growth
The microfinance sub-sector has the capacity to propel activities in the real sector, James Emejo and Nume Ekeghe write
Globally, microfinance banks (MFBs) are known for their intermediation role, especially in the provision of financial services to micro and small businesses with the primary aim of poverty alleviation and financial inclusion. MFBs were established to fill the gap created by the commercial banks by improving the socio-economic condition of the poor in the society.
As a result of the essential role micro, small and medium scale enterprises (MSMEs) that are largely described as the catalyst for economic growth, play in any economy, a vibrant microfinance banking system is always the target of policymakers.
Unfortunately, the MFB sub-sector in Nigeria has not been able to meet its objectives.
In fact, with over 37.07 million MSMEs accounting for more than 84 per cent jobs in Nigeria, the sub-sector has remained a critical tool for poverty alleviation and economic growth.
And the central bank has over the years continued to design policies to ensure that the sub-sector effectively plays its role in the financial system.
That was why the focus of the 27th seminar for financial journalists that was organised by the Central Bank of Nigeria in Gombe recently was themed: “Repositioning Microfinance Bank for Real Sector Growth.”
The uneven spread of MFBs in the country has remained a source of concern to the regulators who are seeking to achieve greater financial inclusion.
Role of MFBs
The existence of huge financing gap and unserved market had prompted the CBN to initiate a micro credit policy framework.
Although microfinance operations have been in existence in Nigeria, dating as far back as pre-independence years, they began in Nigeria as small-scale with traditional thrift saving system and activities of the traditional group networks such as esusu, ajo, adashi, rotating savings and credit associations amongst others.
Government’s initiative to meet the socio-economic complexities and needs of the rural communities and reach rural areas resulted in the establishment of community banks. Community banks emerged to meet the needs of the poor in order to increase their access to finance and improve their income generating activities. However, the failure of the community banks resulted in the establishment of microfinance banks in Nigeria. The objective behind the establishment of microfinance banks in Nigeria was to provide diversified, affordable and dependable financial services to the active poor, in a timely and competitive manner.
The policy was meant to serve as a guide for the activities of informal unregulated institutions as well as new entrants in the sub-sector, as well as ensuring that operators within the sub-sector are guided by a set of rules, principles and a robust legal framework.
According to the CBN Director, Other Financial Institutions Supervision Department (OFISD), Mrs. Tokunbo Martins, the microfinance policy was to provide financial services to the poor who are traditionally not served by the conventional banks.
These financial services, she said includes credit, savings, micro-leasing, and money transfer and payment services.
Unfortunately, 14 years after their establishment, Martins noted that rather than mobilise funds and ease access to credit for micro businesses and rural communities, a lot of MFBs have been operating like mini commercial banks, with a large concentration in urban areas.
Martins stressed the importance of microfinance banks in poverty alleviation, in providing access to finance as well as in banking the banked population in the country.
She said: “Deposit mobilisation by many of the MFBs is not enough, otherwise why do we have so much currency outside the banking system? With the statistics within the CBN, what we are seeing is that the currency outside that banks is still huge.
“Cash should either be in vaults of banks or in vaults of CBN and we know how much we have issued. So when we minus the one in our vaults and we minus the one in the banks then where is the rest?
“What we are saying is that this is the money MFBs should pursue and encourage them to, not just keep it under their pillows or wherever they are putting it.”
She further pointed out that microfinance banks would be pivotal to economic growth if only they can enhance their reach and give out loans to MSMEs to further develop their businesses.
Martins said: “With over 80 per cent of the population working in MSMEs which contributes to over 80 per cent of the jobs and over 80 per cent of GDP.
“Specifically, the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the Lagos Business School did a survey that there are 37 million SMEs and out of that, 36 million are micro and only one million are able to get access to loans.
“And I don’t mean to repeat the importance of borrowing because when you have a business that is profitable, you can enhance that business by borrowing to expand that business as long as the cost of borrowing is less than the return you get on that business.
“The micro finance banks are supposed to be more nimble, are supposed to serve and are supposed to be owned, exists to the rural areas and communities and are supposed to serve them better because these are the majority.”
Furthermore, she added: “It is unfortunate that some or many MFBs are not achieving what they should achieve. When you hear of stories of microfinance in other jurisdictions, like in Bangladesh, microfinance was a success and 50 million people were lifted out of poverty in Bangladesh.”
Also, the CBN Governor, Mr. Godwin Emefiele, disclosed that the aggregate loans granted by MFBs to MSMEs in the country stood at N482.896 billion as at December 2018.
He added that the CBN was working to increase the share of micro credit as percentage of total credit to at least 20 percent by 2020.
Emefiele noted that small businesses had been more successful in securing credit from the microfinance institutions rather than conventional deposit money banks (DMBs).
He noted that data from the licensed credit bureaus indicated that the operations of micro finance banks had helped to improve financial inclusion among smallholder peasant farmers, artisans and other small business operators.
Emefiele, nevertheless, bemoaned the inadequate spread in the location of the MFBs in relation to their target beneficiaries, demand for immovable collaterals for loans, high interest rate, and absence of a credit reporting system.
He added that the apex bank is currently working assiduously to address identified challenges.
He emphasised the fact that microfinance institutions exist to provide financial services to the economically active operators of the base of the income pyramid who are either undeserved or not served at all by conventional financial institutions.
Represented by CBN Deputy Governor, Corporate Services, Mr. Edward Adamu, the governor noted that the CBN had in 2005 formulated the Microfinance Policy Regulatory and Supervisory Framework in line with its developmental role.
“The policy was aimed among other at bringing microfinance institutions and activities into greater focus in order to deepen financial inclusion and alleviate the financing needs of micro, small and medium enterprises (MSMES),” he said.
According to him, “The bank has since then worked towards increasing access to financial services for the economically active poor in order to enhance job creation and poverty reduction.
“The bank remains committed to the economic empowerment of disadvantaged groups including women and actively seeks to achieve this through the instrumentality of microfinance amongst other initiatives.”
He further added: “Only recently, the bank took some actions including a thorough review of the subsector, increased surveillance and revocation, where necessary. These measures were intended to revitalise the sector to ensure the institutions remain mission-focused and to grow public confidence in sub-sector.
“In a developing economy like ours, the link between microfinance and the real sector is quite strong. Microfinance banks are conceived to serve as critical financial lubricants for the real sector, which is the pillar of sustained economic growth.
“At the moment, economic policy in Nigeria faces a major challenge of reviving growth which is the (only) sure path to ending pervasive poverty. Microfinance has worked in this regard in many climes and promises to work in Nigeria, if we get it right.”
The CBN governor added that by increasing access to credit and related services to the economically active segment of the low income population, microfinance directly contributes to expanding the production base and serves as credible strategy for increasing financial inclusion and reducing unemployment.
He added that the CBN, in collaboration with other agencies of government is currently implementing various intervention schemes in addition to promoting microfinance.
Emefiele, however, noted that the theme of the seminar was appropriate considering its recent efforts to prime the MFBs as catalysts for financial inclusion and poverty reduction.
Also, the National Coordinating Consultant FCT Project, Monitoring Reporting and Remediation Office, Steve Ogidan said: “A number of micro finance banks are not present in grassroots or rural areas the adult population of Nigeria 18 years and above is about 99.6m and out of this 99.6m ,63.1m leave in the rural areas, but 49.1 million are women and about 56.7m are 35 years above.
“What are we talking about here, majority of people micro finance banks are to serve are in the rural areas. Majority of them are women and majority of them are young and Microfinance bank as is presently configured even up till today is not reaching the people and central bank now has various interventions.”
He added: “The economy has existed economic recession, but is still recovering very slowly and the latest survey by National Bureau of Statistics and as the Gross Domestic Product (GDP) is growing, domestic value is coming down, oil revenue is increasing revenue sources is coming down and with the growth in GDP, more people that are leaving formal employment are for the private sector.”
He further added: “Micro finance banks are giving credit at 30 per cent and above. It is extremely difficult to take credit at that per cent and start getting a return. That is why the operators of NIRSAL micro finance bank, the regulators, the Bankers’ Committee and NIRSAL came together to see what can we do differently.”
On his part, the Registrar, National Collateral Registry Mr. Mohammed Mainasara, explained how the credit bureaux can facilitate credit to the real sector.
He said: “It is a data bank whereby you can also access information about movable assets. That is if I decide to use my wristwatch to take credit, and this wristwatch has a landmark that it can be identified by, you can endeavour to use that identification to access the level of the progress of that asset under the registry.”
“It allows the borrowers to prove their creditworthiness. The system has a lot of gold ornament that are being kept at home.
“Gold is a very expensive ornament, and if they are to carry all the golden cheque to the bank or sell them in the market, it attracts a lot of money; which means they are creditworthy, but they cannot use those assets to transact business in the financial space.”
Way Forward with NMFB
Speaking further, Ogidan highlighted the strategic objective of the NIRSAL MFBs (NMFBs), saying they are expected to drive financial inclusion, bring every farmer into the financial sector and create jobs.
“We will give loans to SMEs at reduce interest rate which has been fixed at five per cent per annum, then channel the fund to mostly the rural areas who are mostly in credit targeting.
“The business strategy is to serve farmers, SMEs, rural communities and the excluded sector of the economy and quite a number of government agencies are coming in. Last week we had meetings with Ministry of Women Affairs and social development.
“There is a lot of window within the Ministry of Women Affairs. The banks are collecting the money from the ministry and are not disbursing the loan to women, the ministry is coming back to NIRSAL MFB, saying ‘take this money, this is our target- the rural women, the disadvantage women in this location, use technology to deploy the money for them.”
For Martins, inspite of the plethora of challenges, several opportunities exist within the sub-sector. The growing entrepreneurial spirit, increased government interest, large unbanked rural area and high population of poor people are some of opportunities MFBs are expected to tap into.
She said: “The microfinance sector has continued to grow, attracting several players and service providers, offering diverse services. Repositioning the sub-sector for better service delivery especially in the wake of emerging digital age is crucial.
“The CBN envisions a viable and sustainable microfinance sub sector that will be market-oriented, where the private sector plays the major role and the government provides enabling environment through appropriate strategies and institutional policy framework.”
Microfinance has positively impacted on increased access to financial services for the poor and rural populace. Success stories abound, but many MFBs still have to reach sustainability without relying on subsidies.
According to her, despite the challenges the future is bright, with the right support and enabling environment.
These include MFBs adopting sound risk management practices as well as building institutional capacity, regulatory authorities creating an enabling environment, government proving basic infrastructure to support service delivery and enhancing inter-agency collaboration.
TAJBank Deploys NQR Solution To Ease Customer Transactions
TAJBank, Nigeria’s non-interest bank, has announced the deployment of the NQR Payment solution, an indigenous Quick Response Code (QRC) by the Nigeria Interbank Settlement Scheme (NIBSS), for merchants and customers as the newest addition to its innovative e-business channels.
The NQR Payment solution is a secure QR-code-based payments and collections platform developed for merchants and customers to receive and make payments for goods and services in a quick, easy, contactless and secure manner.
A statement signed by the Founder/Chief Operating Officer of the bank, Mr. Hamid Joda, indicated that the ingenious solution would further drive TAJBank’s culture of innovation and create a seamless payment experience for its rapidly growing individual and corporate customers in their banking transactions.
“We are excited to have this payment channel introduced into the nation’s financial system as an addition to other innovative solutions we have deployed over the past few months.
This is a proof that, as we have said in our communications signature line, TAJBank’s interest is always in our customers”, Joda enthused.
In his remarks, the non-interest lender’s Chief Marketing Officer/Co-Founder, Mr. Sherif Idi, also maintained that the deployment of the NQR payment solution would revolutionize the e-payment experience and open new frontiers for small, medium and large scale businesses who are major stakeholders of the bank.
Since it commenced operations in the non-interest banking segment of the financial services industry, TAJBank is noted for its impeccable track record of growth and innovation, rendering exceptional quality services to customers.
The lender’s NQR solution is open to all customers of the bank, both merchants and individuals, across all its branches and digital channels globally.
African Development Bank’s First Virtual Business Opportunities Seminar of 2021, Draws 450 Global Partners and Suppliers
The African Development Bank hosted its first virtual business opportunities seminar (BOS) of 2021 on 6 and 7 April.
The BOS seminars offer a one-stop shop for companies, civil contractors, manufacturers, consultants, and suppliers from the Bank Group’s regional and non-regional members seeking to provide goods and services to projects or to the Bank.
Held virtually as a result of the ongoing Covid-19 pandemic, delegates were informed about the Bank’s strategy for supporting economic growth, its priority areas, rules and procedures for project and corporate procurement, and ongoing public and private sector operations.
During the sessions staff discussed the sectors that offer opportunities for partners and suppliers: climate change; infrastructure, cities and urban development; industries and trade; finance and SMEs; agriculture; health, human capital, youth, and skills development.
“The Bank’s 2021 Business Opportunities Seminar was an impressive learning experience and an open door to interact virtually with different experts and gain insights into best practices and directions for conducting effective business approaches within the Bank,” said David Andrés Rojas Mejía, Senior Business Development Specialist at Catalonia Trade and Investment Promotion Agency.
Private sector partners contributed richly to the discussion, sharing their experience around partnering and contracting with the Bank. They included Kwame Boate, country director of TechnoServe Inc., (Ghana) and Cletus Kayenwee of the Rural Enterprises Program at the Ghanaian Ministry of Trade, who shared their experience contracting with the Bank on Ghana’s “One District One Factory” Enable Youth Program. The program aims to build the entrepreneurial capacity of graduate youth. Participants also heard from Abdelillah Zenjari, Deputy General Director of TEKCIM. He shared his experience partnering and obtaining a loan of €45 million to build a cement factory with a capacity of 1.4 million tons in the region of d’El Jadida in Morocco.
Over the years, the seminars have hosted approximately 2,500 delegates from 55 countries, with an average of 75% of delegates from non-regional member countries and 90% from the private sector.
For the Bank, the seminars increase interest in Bank-financed projects and enhance competition, thereby promoting higher-quality offers that deliver optimal value for money for its regional member countries.
“The sessions have also helped me to understand how to find opportunities for my firm by being better able to navigate your procurement framework and processes,” said Dede Watkin, Business Development Manager at Beale &Co, a participant.
Nirsal: CBN Reopens Application for N50 Billion COVID-19 Loan for Households and Small Businesses
The Central Bank of Nigeria has started receiving fresh applications for N50 billion COVID-19 loan for small businesses and households affected by the pandemic.
The CBN through Nirsal Microfinance Bank announced it has reopened its portal for households and Micro Small and Medium Enterprises (SMEs) affected by COVID-19 to access up to N25 million.
Bashir Ahmad, the Personal Assistant to President Muhammadu Buhari on New Media, disclosed this on March 10, 2021 via his Twitter handle.
The CBN, through @NirsalMFB introduces a stimulus package to support households and MSMEs affected by the COVID-19 pandemic.
An individual can access up to N25m.
Registration for fresh applications RE-OPEND!
Visit to register https://t.co/NPPh71eVNx kindly share for others.
— Bashir Ahmad (@BashirAhmaad) March 10, 2021
— Nirsal Microfinance Bank (@NirsalMFB) March 8, 2021
Finance2 weeks ago
List of Microfinance Banks’ USSD Codes In Nigeria
Government4 weeks ago
FEC Approves $1.5 Billion For Repair of Port Harcourt Refinery
Cryptocurrency4 weeks ago
Zugacoin that Plunges Over 99 Percent in 6 Days Partners Innoson, Buy Innoson Products With Zugacoin
News4 weeks ago
Focus on bank MDs, Others, Workers Reply EFCC Over Asset Declaration
Government3 weeks ago
US Intelligence Says ISIS and Al-Qaeda Are Planning to Attack Southern Nigeria
Government4 weeks ago
Customers TO Pay N6.98 Per USSD Transaction – CBN, NCC
News4 weeks ago
EFCC Directs Bankers to Declare Assets by June 1
Banking Sector3 weeks ago
GTBank Records N201.4 Billion Profit After Tax in 2020