• MFBs on Brink of Mass Failure

Virtually every sector is feeling the bitter pill of the growing economic recession and the microfinance banks, which form a subset of the banking and financial institutions are sadly not immune to the biting economic crunch.

Most operators have been constrained considering the dire straits confronting the sector in recent times, as many businesses are negatively affected.

A damning report

Over 70 per cent of the existing 406 licenced MFBs in the country are now exposed to high risk margin in 2016 more than was the case in 2015.

According to the latest Central Bank of Nigeria (CBN) findings on the sub-sector published on its website, a cursory view of previous years’ performance when compared to this year, showed that MFBs suffered higher risk, poor patronage and low return in investment in 2016.

It classified the categories of the exposure of the banks into various risks, based on findings of 2013 through 2015, with emphasis on 2016 third quarter returns.

As at 2015 performance, microfinance banks recorded above average in terms of risk ratings, but fell below the mark at the end of third quarter of 2016.

Whereas the MFBs paid-up capital increased by 54.40 per cent to N84.18 billion at the end of 2015, representing a surge of 54.40 per cent from N54.52 billion recorded in 2014 the 2016 quarterly review indicated a loss of 1.5 per cent so far.

At the end of third quarter in 2015, the shareholders’ funds decreased by 1.51 per cent to rest at N95.36 billion from N97.03 billion.

Expectedly, managers of the various microfinance banks in the country have complained of neglect by the authorities.

Tales of woes

Mr. Austin Irene, chief executive officer of Devine Microfinance didn’t mince words when he said: “There is yet to be enough attention paid to this sub-sector, by way of government assistance, unlike in the conventional banks.

“For the commercial banks and other sectors, there is AMCON that absolves bad debts from their system. But there is none for the microfinance banks, meaning that if any of us is in a similar situation that the conventional banks find themselves, we are to bear the brunt alone.”

Other operators stated that the present economic downturn has taken away the medium and small business enterprises that form the bulk of their clientele, with many of the benefits of loans taken from the sub-sector by not servicing them.

Speaking at the second edition of the Nigerian Microfinance Platform in Abuja, Chairman, Board of Directors, NPF Microfinance Bank Plc, Mr. Joel Udah, stated that the worrisome state of economic growth and high level of poverty is one of the challenges hindering financial inclusion which is a major platform of microfinance banks.

Also speaking, Mrs. Nwanna Joel-Ezeugo, Chief Risk Control and Compliance Officer, Accion Microfinance Bank, said due to the tough operating economic conditions and foreign exchange policy of the government, businesses are finding it very difficult to cope.

“The real people in the market are actually finding it very difficult to cope because there are so many inconsistent government policies that are not enabling them to actually run their businesses the way they used to. Of course, if they are having issues, automatically, it would affect their ability to operate effectively with microfinance banks.

“The foreign exchange policy is a major issue. The reason being that in the middle of last year, the CBN came up with a list of activities that can be accessed through the official exchange rate. And we know Nigeria has so far been an import dependent economy. When that policy came up, a lot of people were taken away from their jobs and businesses.

“And of course, even the increase in the exchange rate, those that can access official rate, the funds are not available at the CBN, because of the drop in the price of oil and declining reserves. At the end of the day, you find out that either way, the economy is not favourable to the people in the market.”

She called on the federal government to churn out concrete economic blueprint that would help point out the direction of the country’s economy, stating that “If everyone knows the direction we are heading, we will begin to strategise on how to get there. But where there is no clear cut policy, these inconsistencies will kill more businesses and throw a lot of people out of jobs.”

RUFIN to the rescue

Thankfully, the Rural Finance Institution Building Programme (RUFIN) in partnership with the International Fund for Agricultural Development (IFAD) and the Federal Government of Nigeria, have been able to develop and strengthen microfinance banks (MFBs), other member-based microfinance institutions (MFls), by enhancing the access of the rural populace to the services of these institutions in order to expand and improve agricultural productivity and Micro-Small Rural Enterprises.

The programme is being implemented along with four participating institutions namely; the Central Bank of Nigeria (CBN), the National Poverty Eradication Programme (NAPEP), Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) and the Federal Department of Cooperatives (FDC). Besides, the initiative is being supported by a Loan Agreement of US$27.2 million.

Shedding light on the foregoing, the Deputy National Programme Manager, RUFIN, Mrs. Unekwu Ufaruna observed that the initiative has since developed a training manual for capacity building of MFBs and financial NGOs.

Specifically, she said: “So far 33MFBs, 10 Financial NGOs selected from the outcome of Risk Institutional Assessment of NDIC/CBN and the over 4,000 Community Based Credit and Savings Organisations in the past one and half years have been subjected to vigorous capacity building and provision of necessary hardware and software ICT equipment. In line with the identified gaps from the Risk/Institutional Assessment for MFBs, Financial NGOs and Financial Cooperatives, a tailor made curriculum was designed, to ensure their capacitation. Office equipment such as desktop computers and hardware were distributed to 32 participating MFBs.”

Besides, she said, as part of the capacity building of MFls, MFBs and RMFls, which is one of the core mandates of the programme, RUFIN trained 27 MFBs (MDs/Credit Officers) on product development. This has resulted in improved financial products piloted by MFBs and increased deposit mobilisation. Also, 33 MFBs have been trained on Risk Management while 1,524 staff of RMFls were trained on gender learning and action system, making microfinance work, enterprise management and governance and entrepreneurial skill development respectively.

In order to enhance client outreach through establishing linkages between RMFls and formal banks, 3,516 Rural Microfinance Institutions have been linked with formal banks. A total of N66,598,865.88 of voluntary savings have been mobilised from 31,149 savers in the 12 participating states. Out of these 44.68% of these savers were women, while 55.32% were men. A further analysis showed that 20.69% were youths while 0.91 % are physically challenged.

The programme has formed and strengthened 6,295 village credit and savings groups consisting of 149,990 members in the 12 participating states. In addition, 529 RMFls with 1413 members were trained on gender learning and action system, making microfinance work and governance etc in 11 states consisting of 875 men and 38 women.

Speaking recently, Mallam Adamu Ibrahim, a microfinance expert with RUFIN, said most RUFIN-mentored MFBs have benefitted immensely from capacity building training among other expert advice which has helped to improve their bottom-line ultimately.

At the risk of sounding immodest, he said: “Many MFBs have benefited from RUFIN’s capacity building programme thus far and have been able to boost their portfolio investment within this period because they are now better equipped with the right skills set.”

Echoing similar sentiments, Mr. Godbless Afor, the Executive Secretary of the Association of Non-Bank Micro Finance Institutions of Nigeria (AMFIN), said RUFIN had provided training and capacity building programmes, logistics and technical support to the association.