By PROVIDENCE OBUH

The Managing Director, Osun State Polytechnic (Ospoly) Microfinance Bank, Mr Femi Fapohunda has said that the high interest rate charge by Microfinance Banks (MFBs), are as a result of the high cost of money in the money market.

This is in line with complaints gathered from customers as well as small scale business operators who are aggrieved over the high interest charged on loans. These loans range from four per cent to ten per cent depending on the bank involved.

Fapohunda, said “There is no way interest rates of MFBs will not be high. Cost of money in the money market is also high. So you cannot take money from the money market, depositors’ money that you are also paying high interest on and give it out by way of loan at a very low interest.

“So they can not but complain because you are not also giving them free money; you are giving them money that you collected from depositors at a very high rate too.”

Meanwhile, Fapohunda in a separate interview with Financial Vanguard, disapproved claims that MFBs rely on loans from commercial banks to fund their businesses.

He stressed that it is the other way round as commercial banks are being funded by deposits from customers of the banks or shareholders fund.

According to him, “it is a wrong assertion to believe that microfinance banks rely on commercial banks. We rely on our customer’s deposits not on commercial banks, majority of us do not take loan from commercial banks.

“I am saying it categorically, 90 per cent of MFBs don’t accept loan from commercial banks for the funding of their businesses, they fund their business through deposits from customers, not from commercial banks. “In fact it is the other way round, commercial banks look for deposits from MFBs.”

Asked if interest rates charged on deposits from commercial banks are amplified, he explained that the banks follow due process on charges on deposits. “There is what we call minimum deposit rate, deposit rates generally are negotiable.”

On Ospoly MFB’s recapitalization, he said that the bank is aiming towards attaining the status of a state microfinance bank, stating that people are depositing money, therefore, “before December, we would have attained over N100 million capital bases.”

Continuing, he revealed that the loan portfolio in Osun State is well over N3 billion spread over 15,000 artisans and small scale businesses, adding that the association has added value to people’s life in the state and also improved on its GDP.

“We have been doing a lot especially for market women, traders, salary earners, small scale business men and women have been benefiting from microfinance in the state. Not at Ospoly alone, but the state association, the National Association of MFBs Osun State. We are vibrant. In fact, we have been in the forefront of microfinance policy in Nigeria.”

Speaking on the clamour for extension of the recapitalisation date for MFBs by the Central Bank of Nigeria, CBN, he said policies become binding once they are introduced.

“Once it is a policy, you can only plead for time, but more often, policies are never changed no matter the situation. This is CBN’s policy and they are the chief regulator in  collaboration with the NDIC. We don’t have a choice, we need to comply, if there is no control, there wouldn’t be a vibrant microfinance subsector.