By PROVIDENCE OBUH

The National Association of Microfinance Banks (NAMB), Lagos State Chapter, has revealed that its bad loan has moved up to N16 billion.

Speaking at the South West Zone capacity building programme organized by the association in Lagos, the Zonal Chairman, Mr. Olufemi Babajide, maintained that as at June 31st 2012, the bad loan was N10 billion but has since increased.

“Our biggest problem is bad loan, customers are not in position to pay back their loans. Bad loan is part of our business and ours is to manage it well. We need a structure that can refinance that bad loan so that we can continue to have liquidity.

“We are running within availability of liquidity, we are running within the funds that we have from depositors, from investor, from entrepreneurs, that is what we are using and that is why we cannot cover our target market.

“In Lagos state alone, we have a target market of eight million but we have customer base of 1.4 million, so you can see that the funds we have are limited, if we have more fund we will be able to cover the entire market.”

Meanwhile, Babajide recalled that Nigeria MFBs started operations on the wrong template, which according to him was a high fixed cost.

“When the likes of Asha MFB came in, we now knew that we can operate low fix cost. So the issue was the issue of template, they came in 2009 and we started in 2005, so it was a question of template. When we first started, you will see branded microfinance bank vehicles on the street of Lagos, but you can not see that now, we have advised ourselves, we are now using the right template, low fix cost.

“But we have been surviving with this, a number of MFBs have been surviving, if we have survived up to date we will continue to survive into the future.”

Calling for reduction on operation cost, he said there should be regular electricity supply.  “If you look at most of our financials, the amount we spend on power is very high, it is about one-third of our overhead, so once we have that one taken care of we will be okay.

“The future of the sub-sector is bright. Funding is our major challenge and we need funding, We have issues of bad debt. We are saying that CBN should set up an outreach that can buy up our bad debt, refinance our bad debt so that we can pay overtime. We have legal issues, we need special court to try debtors of microfinance bank and staff of MFBs involved in fraud,” he said.