By PROVIDENCE OBUH

Microfinance Banks (MFBs) are basically known to perform financial intermediation, that is, servicing or financing the Deficit Economic Unit through the resources derived from the Surplus Economic Unit and at reduced interest rate.

Unlike the commercial banks, they provide financial services such as credits and financial advisory to the active poor who ordinarily would not have access to such services due to its perceived characteristic risks level.

A financial analyst who spoke with Financial Vanguard said that the recent past experiences of microfinance banks has led to the loss of confidence in the bank, placing them on a tight spot.

According to the analyst, Manager at Novel Microfinance bank Mr. Princewill Uruakpa, “MFBs are still facing the problem of inability of customers to pay back loans, coupled with the bias created by the closure of several microfinance bank.”

Uruakpa explained that customers are bias about MFBs, consequence to the Central Bank of Nigeria’s revocation of licences of  majority of the banks as a result of their inability to meet capital base.

In addition, he pointed further saying “given that our environment is so dishonest generally, even when you are telling the truth because somebody has lied somewhere nobody wants to believe you.

“When you talk of microfinance, people see us as thrift homes or corporative homes where you go to make loan application and they will grant you loan for a period of two weeks. But actually the whole idea behind Microfinance is for the licenced bank to be able to mop up all the money which we call micro money from the system, mostly from market women.”

Speaking on Novel Microfiance Bank, he said “The idea behind our own arrangement as a bank, is to encourage the less literate, we have various accounts, you can even open an account with N100, then you can encourage a pepper seller or tomato seller to be saving N100 everyday which will amount to N3000 per month.

“By the time the woman trade for three years you know how much she would have made,

So that is the idea behind micro finance, the ability to mop micro funds from market places.

“However, some customers have sense interest to save and not to borrow, so we can send our marketers to their shops to do daily collection from them. And then the marketer will pay the money into the banks accounts and return the teller the next day. They have a pass book the only time they come to the bank is when they want to withdraw,” he said.