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Why microfinance sub-sector is underperforming – CBN

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By Providence Emmanuel
THE governor of the Cen-tral Bank of Nigeria, CBN, Godwin Emefiele, has indicated that the Microfinance sub-sector is underperforming the set expectations for which they were created.

Speaking, at the just concluded, NAMB Microfinance Banking Conference/Award Night 2018, themed: “Financial Inclusion For MSME Development in Nigeria: ‘Making Microfinance Banking Work’ in Abuja last weekend, Emefiele who was represented by Deputy Director, Financial System Stability, Mrs. Aisha Ahmad, said that the microfinance branches per hundred thousand adults is short of target due to several constrains facing MSMEs, including lack of accessible and sustainable finance; perception of MSMEs as being too risky and having poor managerial capacity; having inadequate collateral and low financial literacy level of MfBs promoters.

He stated: “These are all the issues that sometimes preclude the MSMEs from access to finance. Despite the large number of licensed MfBs, which at last count, there were over 1008 as at June 2018, the objectives underlining the policy have only been marginally attained.

“Total credit provided by MfBs at the end of 2016 amounted to just 1.1 percent of all credits provided by regular Deposit Money Banks, DMBs. Also, MfBs assets are barely one percent of the assets of DMBs.

“From a financial inclusion strategy perspective, the target number of microfinance branches per 100,000 adults is meant to be 4.6. Today, we are at 2.3 per hundred thousand adults; we are half way to get covered.”

Former Deputy Governor of the Central Bank of Nigeria, CBN, Prof. Kingsley Moghalu, while speaking at the event, however, said that the implementation of Nigeria’s N1trillion Venture Capital Fund, VCF, would crash interest rates in Microfinance Banks’ by 40 -50 percentage points.

Moghalu stated that the development will likely encourage more entrepreneurs to take loans for investment, thus contributing to economic development.

He explained that for financial inclusion to completely take shape in Nigeria, financial services providers, such as MfBs, must begin to consider the introduction of elements of developmental banking not spearheaded by the already over involved government of Nigeria, maintained that Nigeria has had her fair share of experimenting with development banking especially with Development Bank of Nigeria, BoA, BoI, NEXIM Bank, Federal Mortgage Bank and the Infrastructure Bank.

President of the NAMB, Mr. Rogers Nwoke, said, “Each time the question is raised about failure of MfBs, we hear the routine rhetoric of bad corporate governance, unethical practices, mission drift, etc. while I do not deny the absence of these issues in not only microfinance banking, but in prevalence to key sectors in both public and private sectors of our economy and indeed corporate Nigeria, I would rather think that there are deeper fundamental problems of the microfinance models adopted in Nigeria.”

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