The Managing Director/Chief Executive, Moyofade Microfinance Bank Limited, Mr. Abimbola Michael, in this interview speaks on how the National Collateral Registry (NCR) would impact the microfinance industry. He also highlighted challenges confronting MfBs in the rural area. Excerpt:
By Providence Emmanuel
HOW would you assess the National Collateral Registry (NCR)?
It is still a new initiative. Some years’ back the CBN organized a lecture when they wanted to introduce the collateral registry and we are now in it. When you are starting a thing, there would always be hiccups at the initial stage and we have to put so many things in place for that thing to be effective. So that is the stage we are. Hopefully when it is concluded and we are able to start the system, I think it would be better for the MicroFinance Bank (MfB) sub-sector and even the clients. It would be easier to access loan when we see both movable and immovable assets. Before now, we based our loan on character, but because of experience and the feelings we are receiving from the market, some people have to commit themselves with one thing or the other. That is the more reason the collateral registry is very important and they are coming up with the idea, but I know that before the end of the year, it would be more effective within the subsector.
Is your organisation part of the MfBs that have embraced NCR?
When a new programme or process is being introduced, it is a gradual process and we would get there one day as people are keying into it. We are getting more information and proper enlightenment, we would get there.
What are your expectations for the subsector in this year?
For this year, our expectation for the subsector is to enlarge our customer base, alleviate poverty in the country, improve productivity among the poor and provide credit facility for the active poor. They have the capacity to do business but they do not have the money to finance the project. We also want to contribute to the economic growth of the country.
Why are they not getting funds despite all the funds made available by the CBN?
CBN is trying in their own capacity to ensure that money gets to the active poor and people that have the necessary requirement are accessing the funds and I think they have now relaxed the conditions to ensure the money gets to the beneficiaries. Some states are working with the microfinance banks to access the fund and release the money to the clients in their various states. What we need most is enlightenment, training and capacity building for these people because some of them believe that this money is government money and political largesse. So when they collect, they do not want to pay back. That is the kind of problem we experience in this kind of programme. But in Osun State where we are operating, I can say boldly that the state government has tried. We were able to cover some ground in respect of that Fund and as revolving money, we repay as at when due. But government should try to improve on the disbursement and also look at ways of evaluating the programme. For Osun State I can say kudos because they are trying and even all the participating microfinance bank are trying even with the programmes in the state.
What are the solutions to some of the identified challenges?
Both the MfBs and the commercial banks are facing the same problem. Even those that have legal mortgage on their property before you can realize it, they would go to court to seek for injunction. Majority of the problem we have in this subsector is lack of trust. We cannot trust majority of the people with money, they want to access fund and they do not want to pay back and the cannons of lending that we are following does not agree with that. We deal with the likes of hair-dressers, vulcanisers; meat sellers and other small business people who need light to function properly.
If all these things stop working effectively, it would have negative impact on their repayment, so that is a challenge. Secondly, when you give them and they fail to pay and you take them to court, they will even tell you to go that they will meet you in court. Another thing is that they don’t have easy access to fund in the commercial banks, so they are coming back to the MfBs. Majority of the commercial banks are closing shops in the rural areas.
It is only the MfBs that are working there, so they put so much pressure on the MfBs. All these things must be considered and government should come to our aid and there should be a special court to try recalcitrant debtors of MfBs so as to serve as deterrent to others that do want to pay.
MfBs operators too should perfect all the necessary things that need to be perfected in their loan process so they do not give unnecessary problem in the near future. We also need to generate profit into the business and increase our capital base, that is one of the things we need to do and the issue of using per at five percent as benchmark is working against MfBs. The CBN should look at it and increase it to 10 percent like that of commercial banks because it is affecting our performances.