By Amaka Agwuegbo
The use of microfinance to enhance income generating opportunities of the ‘active poor’ has become a popular tool for governmental and NGOs institutions in raising the standards of living in developing countries.

Mrs. Bunmi Lawson, MD, Accion MFB

It is proven that there are strong potential synergies between microfinance and the provision of basic social services for clients, and benefits derived from microfinance, basic education and primary health care are interconnected, with the impact of each increasing when delivered together.

Though the operational policy framework states that MFBs were primarily launched to provide financial services to the un-banked 65 per cent of Nigerians, but changing times demand that MFBs leave their comfort zone of financial intermediation to offer social intermediation services to their customers, which is instrumental to the exploitation and development of economic opportunities in the informal sector of the Nigerian economy.

Vanguard’s investigations revealed that since MFB are mono-product banks, they tend to focus only on their financial intermediation functions, thus neglecting their social intermediation functions.

According to the Managing Director of Meridian MFB, Mr. Innocent Ezema, MFBs have to look beyond providing financial services to seek other avenues to make money.

“We have decided to focus not only on financial intermediation responsibilities but also on social intermediation like insurance, healthcare and educational programmes. The decision to focus on social intermediation is because there are other social aspects that have not been taken into consideration. We want to give the ‘active poor’ access not only to credit services but healthcare, insurance packages and quality education because they need these services to earn more money.”

Research has shown that the marginal cost of providing education or basic health information can be substantially reduced when the infrastructure for microfinance is already in place.

This Ezema agrees with, saying “We assist account holding parents with their children’s education by granting them facilities to offset the fees. A parent needs to have a certain percentage of the fees in his account to qualify him for a loan to make up the fees. Then from subsequent deposits, we deduct an agreed amount. A lot of parents appreciate this package because it enables them to save and at the same time, sponsor their children to school.”

Pointing out that micro-insurance solves the problem of instability most ‘active poor’ face, the Managing Director, Accion MFB, Mrs. Bunmi Lawson, said a lot of their customers appreciate these social servies.

“Accion MFB provides life insurance for her customers. One of the key issues the ‘active poor’ face is instability and once MFBs can provide them with micro-insurance, that is taken care of. Basic health is likely the most crucial intermediation but should be combined with microfinance so as to strengthen the impact on the #1 Millennium Goal of reducing those living on less than $1/day.

“Though we can’t provide them with premium healthcare due to their low income, we try to offer good quality healthcare package and they have come to appreciate these packages.”

For Jide Tade, Managing Director, Halmond MFB, offering such social services would reduce the effects loan defaults.
“It is imperative for the MFBs to offer such services at the micro-level. Micro-insurance is a good thing MFBs should be involved in because it would help cushion the effects of loan defaults. We are in partnership with an insurance company to provide such services.

“If we are doing micro-insurance and a customer wants to take a loan, insurance companies would be involved despite the cash collaterals. But the customers need to be educated on micro-insurance because they may have difficulty understanding that they’ll be charged 0.1% for insurance on loans taken.

Jethro Akun, 1st Vice President, National Association of Microfinance Banks, NAMB, is of the opinion that MFBs should provide social intermediation services, just like their commercial banks counterpart.

“Providing social intermediation, particularly micro-insurance, is important due to the little or no collateral we ask for on loans. For instance, if an MFB wants to give out motor cycles to customers, they can insure such first before giving them out.”

For the Chairman, NABM, Lagos Chapter, Chief Olutayo Adenekan, it is okay for MFBs to engage in social intermediations but it is left for the bank to decide whether to or not to engage in such social services.