By Providence Emmanuel
What are your expectations for the microfinance sub sector in 2018?
Actually, we have been having some serious liquidity challenge for a while and we hope that it is worth solving this year.
Like the issuing of $300 million that they are trying to release to the market, we hope that would spur economic activities and we should be able to tap into that. We are also hoping that the economy would pick up so that there would be a lot of activities in terms of the microfinance subsector.
We are thinking that people would have more economic power so that there would be some savings which we can pay into the little investment of the active poor in terms of giving them more loans to be able to improve their business activities.
We are also thinking that what the government has done is to give us some lee way to do microfinancing, like the micro housing scheme of the federal government which was introduced for people who have special interest, if it gets to the citizens they would key into it, those are the things we are hoping to do in the year.
What are the factors behind high loan default in the industry?
That is a major challenge that we face in the industry because we lend to the active poor who do not have collateral. The Nigerian factor too, when people want to take loan they are so cognitive, they are ready to do all that you ask them to do, but the moment they take the money, it becomes a different ball game.
What we are doing with the Central Bank of Nigeria, CBN, is that we have been trying in this regard by introducing the Credit Bureau. The Credit Bureau gives a helping hand in limiting the menace of people not wanting to pay back loan.
Before you give credit to anybody, you are expected to check with the credit bureau the status of the customer. We the microfinance too have to follow the rule by keying into the credit bureau system so that all customers’ data is keyed into the system so that every MfB can check any customer coming for money by clicking online to check the customer before giving credit.
That way, you have some level of confidence that whoever you are giving the money to has the integrity to want to pay back. However, integrity is one thing and ability to pay is another. What if you have integrity to pay and you have some challenge in the business and you are unable to pay back? Because there is no serious collateral to fall back on, you may not be able to recover your money.
But be that as it may, we have a method we use in curbing this menace. For instance, doing group lending in which individual member of the group is a potential guarantor for the others. That can also curb the menace of bad debt in the system.
What are the MfBs doing to ensure interest rate is comfortable for borrowers?
The challenge here is that the system is good but the customers themselves are ready to take their money to the commercial banks but when it comes to taking money, they want to borrow from us but they put their savings in the commercial banks. So you can see that it is a question of where do we always get money to lend to them.
There is high cost of borrowing from commercial banks in addition to high operation and dolling it out to customers in bits. You also take more energy pursuing customers to get your money from them. Meanwhile, commercial banks do big ticket transactions, one member of staff can pursue millions of naira worth of transaction while a microfinance bank need so many staff to pursue that volume that the commercial bank lend. By all standard, cost of doing microfinance business is very high.
Are you aware of CBN’s move to increase MFBs’ minimum capital requirement?
At the level of the association, we are looking at that, I don’t know what would be the outcome, but we are keeping our fingers crossed to see how that works out. Of cause, sometimes government might have better understanding of the system. From the association’s point of view, we want to see how we can handle this but for us we think that raising minimum capital requirement might erode confidence but let’s see how it works.
About 95% of MfBs have not been able to access the N220billion MSMED fund. Why is this so?
Again, government policies sometimes you wonder whether these policies are well thought out. We felt that by now that money would have been fully disbursed to MfBs but only a few have accessed the fund. I think the criteria are too stringent for other MfBs to access the money. We hope that from the association’s point of view we would put more pressure on government to ensure that so many MfBs access the fund.