Godwin Ehigiamusoe, Executive Director LAPO,Â a micro-finance institution based in Benin City, has given reasons for low performance of micro-finance banks in Nigeria year 2009 and also forecasts a better future for the industry in 2010.
â€œThe growth experienced by the sector in 2008 and early 2009 was eroded in the third quarter of the year. The nature of the crisis in the sector is mainly that of perception which resulted in liquidity crisis.
With Managing Directors of some commercial banks being sacked and accused of mismanagement, the rating of commercial banks and indeed banking fell flat.
ForÂ the micro-finance banks, it was worse and certainly a case of â€˜if gold could rust what would iron doâ€™.
That is if commercial banks usually regarded higher than micro-finance banks could go bad, micro-finance banks lost respect of the people. Depositors rushed for their money in micro-finance banks. There was no reason, these micro-finance banks would not have wobbled.
The second reason relates to the operational approach. For whatever reason micro-financeÂ was presented to Nigerians as â€˜micro-bankingâ€™ that is, doing micro-finance as banking on aÂ small scale.
Typical of Nigerian banking fashion there was rush to mobilize huge deposits and high expense profile though the latter has been exaggerated.
Future of micro-finance practice I am very optimistic over the future of micro-finance banks in Nigeria for a number of reasons.
First, is the realisation by everyone including regulatory authorities, that there is an issue of methodology. With proper orientation and training, micro-finance practice will be redeemed.
I do not think achieving this is beyond the regulatory authorities and operators. The CBN is taking actions in this direction.
Second, Nigeria is a countryÂ of exceptionally enterprising people who will always require services of micro-finance banks. Ready market is assured.
Third the crisis in the financial sector will soon pass over leading hopefully to robust financial intermediation with micro-finance banks playing a prominent role at least at the â€˜bottom of the marketâ€™.
Lastly the CBN is also looking into regulatory angle to the current crisis in the sector.
Why the economy did not score high Most actors in the economy tend to agree on the fact thatÂ business was quite challenging during the year.
It could not have been otherwise, where the national currency fell in values as naira did, during the year; where source of national revenue fell the way it did. With price of a barrel of oil grumbling from $170 to below $50 and with value of stocks/shares crashing the way it did in the year. Also infrastructural environment was not enabling.
Power supply was probably worse than in 2008. The roads were certainly worse.