By  Amaka Abayomi

In its bid to eradicate poverty and financially empower Lagosians, the Chairman of Lagos State Microfinance Institution (LASMI), Bashorun Alabi-Macfoy, has said the Institute is willing to partner with financially capable microfinance banks, MFBs, that have good assets and customer base to achieve total self empowerment of the poor.

Speaking to Vanguard, Alabi-Macfoy said government has set aside a huge sum of money for micro lending and this would need MFBs to facilitate it.

“For 2011, we are looking at continuation with MFBs because LASMI is looking for financially capable MFBs that have good asset and customer base, particularly those that are good at group or cooperative lending to partner with.

“To this end, we have sent out our monitoring officers to watch their activities and visit their customers to see how they are performing because these would serve as pointers for us to know how to deal with them this year. But we would mainly deal with MFBs that concentrate on group rather than individual lending because the group pressure would force all the members not to default on payment.”

Alabi-Macfoy said government, through LASMI, has been doing a lot to eradicate poverty and 250,000 people were empowered in 2010.

“In 2010, we extended our activities to the taxi cab operators who needed micro_funding because they get people to buy used vehicles for them and they deliver an agreed amount daily. At the end, they are poorer and the vehicles don’t belong to them.

“Government to come up with a programme to partner with the taxi operators through the driver-owner scheme and at the same time, put new taxis on the road that would suite the mega city programme of the state government.

“We went into agreement with some commercial banks for loan facilities and First Bank gave about N350 million for the purchase of 150 taxi cabs which we paid equity contribution on. The operators were registered through the Ministry of Transport and were asked to repay the loans monthly.

We charge them 12 per cent which is far lower than the 22 per cent First Bank charged us. Also, LASMI single-handedly purchased 100 taxi cabs at the cost of N270 million and they are to repay the loan over 3 years.

“The second major project was the Agric-YES programme, which is a youth empowerment scheme in agriculture in Epe, Lagos and N500m loans have been given through the Agric-YES project. There, young school leavers and graduates are trained in farming, poultry and fishing and it is affiliated to the University of Agriculture, Israel.

“Some Israeli and Nigerian agriculturist teach them and some of the best students among the first 100 that started the programme were given scholarship to Israel for further studies.

“Government did this for them to be able to produce enough food for sale and to groom young farmers. After the training, they form themselves into cooperatives and government gives them land and loans to buy the equipment that they will need.”

Alabi-Macfoy said because the state government wants to ensure that as much people benefit from these revolving loans, LASMI intends to increase the number of beneficiaries through its partnership with MFBs.

Though the state chairman of the National Association of Microfinance Bank, Mr. Olufemi Babajide, said they have received 183 applications from MFBs that want to partner with LASMI, Alabi_Macfoy said LASMI is capable of working with as much MFBs as possible, though the institute has not received any application.

“Though we have not received any application from the state executives, but government has set aside a huge amount of money for micro lending. But we would mainly deal with MFBs that concentrate on group rather than individual lending because the group pressure would force all the members not to default on payment.

“That said, our lending process is in two stages. First, applications are made here and management would review the financials of the MFBs and make recommendations which would be passed to the Board. From there, they are sent to the Investment Committee of the Board which again reviews them and recommends those we would partner with and how much would be committed based on their financials.

“The second stage is seeking the governor’s approval for the release of fund. But we would try as much as possible to first consider those operating in rural areas.”

He urged MFBs to employ the use of biometric system of identification of customers to mitigate the occurrence of bad debts.

“The major reason for the huge bad debt they face is that they rushed into microfinancing without doing thorough customer identification and this is the cause of the bad loans. Most times, they do not go to where their customers conduct their businesses to know if they are doing what they said they do.

“Another factor is the high level of poverty in the land and the lenient collateral on MFB loans which made most people to take advantage of the situation and disappeared with their money. Even their staffs are not left out as some of them disappear with customers’ money

“So, for them to overcome the issue of bad loans, they need to instill proper corporate governance by ensuring that their staffs take their supervisory roles serious. They should also avoid the temptation of going for big offices, flashy cars and the likes.

“That is why we are looking for MFBs that concentrate on group lending because the members know each other and would urge the other person to pay up to enable them apply for another loan. For instance, the Agric-YES loans are given to groups of farmers and are insured by the Agricultural Cooperative Bank, which was set up by government.

“Despite the fact that government trains and makes money available to them, they are required to register as cooperatives and the money given to them is supervised by those who train them in the farm.