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‘Why operational framework for microfinance banks should be reviewed’

Mr Deji Olanrewaju, a member of Governing Council of Chartered Institute of Bankers of Nigeria, has called for review of the policy framework on microfinance institutions in Nigeria.

He  said  that microfinance banks are not meeting the expectations of the people in terms of service delivery. Olanrewaju, who is also the Head of Department of International Law, Babcock University, said that these financial institutions have failed to meet their objectives due to poor regulatory framework.

“The interest on loans from microfinance banks is higher than commercial banks which is not supposed to be so. These banks were specifically created to serve the grassroots and their businesses; to serve small -scale businesses.

“It is illogical that a finance institution at the lowest cadre on banks’ rating scale will be charging more from its customers than other banks with huge capital bases,“ he said.

Olanrewaju said that the essence of microfinance banks was to assist small businessmen to access loans at very low interest rates so as to remain in business.

According to him, Nigeria will not enjoy the expected gains from small-scale industries if government fails to review the framework guiding operations of microfinance institutions.

Olanrewaju advised government to be thorough in the issuance of licences to prospective microfinance operators. “Incompetent operators, associated with some distressed banks, ought not to be allowed to enter into micro finance business. That is one reason why grassroots patronage of these banks is declining by the day because some of the operators are not trustworthy.


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