MICRO FINANCE INSTITUTIONS FAIL EXPECTATION TEST
MANY WILL FOLD UP IN 2020.
Micro Finance
Deborah Adekaa
The Federal Government of Nigeria’s drive to private sector development through entrepreneurship, the banks which are supposed to be money lending platforms for private businesses. A young entrepreneur in Benue Sam Nenger said: “It is unfortunate how media platforms keep advertising lending platforms like Bank of Industry, but in reality this is not common to go by. As a matter of fact, I can show you documents of loans I have applied for overtime in different banks, but one never gets passed the screening procedure. In fact, my experience has thought me that the loans are better assessed by family, friends and established businesses. The rest of us keep getting the same message, ‘your application is being considered.’ You think it is that easy? Try it.”
A senior staff of the Central Bank of Nigeria who preferred not to be named said the Micro Finance Banks are supposed to be easily accessible to business starters and the low income investors, but the concept has been abused: “Regrettably, sometimes these banks are not trustworthy, I do not want to call names, but you are in a better position to tell me how many Micro finance banks have come and gone without impact. Some micro finance banks have disappeared into thin air with customers’ deposits amounting to hundreds of millions. In most cases, instead of empowering young investors, these banks give out loans to politicians, who never returned same, a case that has resulted into litigations.”
Titus Chiba is Lawyer and Credit Officer of Better Life Microfinance in telephone conversation with Reporter said Microfinance bank do not operate as deposit banks, there role is to serve the needs of micro income earners, provision of door- to- door financial services as well as providing training for farmers groups and small and medium scale enterprise. The financial legal experts however decried the lack of financial strength of many microfinance banks to meet up with these responsibilities as most Microfinance banks are without shareholdings and most times uses depositors’ money as debts to family members and friends who don’t repay these loans which results to the folding up of many microfinance banks. He stated on a final note that as from 1st of April, 2020 all Microfinance bank shall comply with both the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC) microfinance bank recapitalization policy where hence forth to obtain a National License for a Microfinance with national operation across the 36 states of the federation including the Federal Capital Territory such must have a minimum shareholding of 5billion Naira while State License to operate across all the Local Governments Areas of the State is 1billion Naira and a Unit Microfinance bank being a one stop shop is N100 Million Naira.
An Economist with the Benue State University, Makurdi who is also General Manager, Benysta Microfinance Bank, Dr. Nomor Terpase said the role of the microfinance banks is to provide funds to small businesses without collateral as well as provide employment for youths and in a way contribute to the economic growth of the society. The criteria to give out loans is measured in the individual’s ability to pay back as at when due and the individual must operate and have an active account so they can monitor how money goes in and out of the account.
Another Economist, Dr. Joseph Fefa who is also a don with the Benue State University said the issue of loan in Nigeria generally is lack of trust between the financial institutions and their customers; people fail to pay back loans which results to the collapse of the Money lending Institutions. Dr. Fefa also said collateral that is commensurate to the amount requested should be presented to keep the customers on their toes. He thinks a rigid law guiding the administration of loans will help both parties better.
Orlu Yua who operates a hair dressing salon on Abu King Shuluwa road Makurdi said she is afraid to obtain loan not only from Microfinance Banks, but all money lending platforms because of the interest rates. As a matter of fact she does not operate with any bank at the moment.
Theresa Agia who sells second hand clothes popularly known as Okrika in Wadata Market said she started her business with the loan she obtained from a microfinance bank and she has not had any challenge paying back. She however said the Government can do better with the Money lending institutions to make things better for the masses.
While conventional banks are strict with loans, the micro finance institutions are closer to the common people and need to do more in the lending business to help improve private businesses striving for growth. This will help provide jobs for the millions of unemployed youths roaming the streets getting enticed to social vices like drug abuse, cultism and other forms of criminality.
An estimated 1.7 billion people around the world do not have access to financial services according to World Bank statitics. For this, the Nigeria Government established microfinance banks in the year 2007 as a catalyst for small business owners. The Microfinance banks are mandated to help in economic development of the mass population.
