From Business Day Online The Central Bank of Nigeria (CBN) has re-stated its commitment to establish special court to hear cases on loan default in microfinance banks. Olufemi Fabanwo, the Director of Other Financial Institutions Department in CBN, disclosed on Thursday in Lagos, saying that the apex bank had constituted a committee that would... 

From Business Day Online

The Central Bank of Nigeria (CBN) has re-stated its commitment to establish special court to hear cases on loan default in microfinance banks.

Olufemi Fabanwo, the Director of Other Financial Institutions Department in CBN, disclosed on Thursday in Lagos, saying that the apex bank had constituted a committee that would look into modalities of establishing the court.

The director was in Lagos to attend a meeting of the Committee of Microfinance Bank Directors in Nigeria. According to him, the court is vital to survival of the sub-sector.

Fabanwo said that the nature of service rendered by the sub-sector did not permit it to accommodate bad debts as it would distort its buoyancy and force operators out of business.

He said the apex bank had held in-depth discussions on the issue with the Ministry of Justice so that the court could be effective when established.

The CBN director advised the directors of microfinance banks to ensure that loans were given out to only the active poor.

According to him, this is the target group that need the loans from microfinance banks to trade.

He said that the reason for his advice was to make their loans recoverable easily.

“Beyond this, microfinance banks are to guide against too much investment in fixed assets, flamboyant office structures and exotic cars as the nature of micro financing does not permit this,’’ he said.

Speaking at the meeting, Olufemi Babajide, the Chairman of Lagos Chapter of National Association of Microfinance Banks, said that loan defaulters in microfinance banks were enjoying “reprieves”.

He said that the apex bank was now ready to establish the special court, “one year after it made the pronouncement’’.

He said that the delay in establishing the court had raised concern among operators of micro-finance banks as the delay was negatively affecting their activities.

“Some loans that would have been recovered, if the special court had been established, are already going bad,” he said. “The sub-sector needs the special court as quickly as possible.”

From Business Day Online Nuhu Danjuma, a finance consultant, says Nigeria is the largest microfinance market in Africa, but that the sector has never benefited from cheap capital. Danjuma, who spoke in Abuja on Thursday, said that high interest rate charged on loans by the microfinance banks was because they did not have adequate operating capital. His... 

By Obinna Chima, This Day Live As part of efforts to ensure that they smoothly migrate to the International Financial Reporting Standards (IFRS), Microfinance Banks (MFBs) in Lagos State had embarked on capacity building programmes. Chairman, Lagos Chapter of the National Association of Microfinance Banks (NAMB), Mr. Olufemi Babajide, who disclosed... 

By Onyinye Nwchukwu, Business Day Online The much awaited Micro-finance development fund, proposed to enhance financing in the Microfinance sub-sector and boost the economy, will come on stream before the second quarter of the year ends, authorities at the Central Bank of Nigeria (CBN) confirmed to BusinessDay at the weekend. Femi Fabanwo, Director,... 

By Onyinye Nwchukwu, Business Day Online

The much awaited Micro-finance development fund, proposed to enhance financing in the Microfinance sub-sector and boost the economy, will come on stream before the second quarter of the year ends, authorities at the Central Bank of Nigeria (CBN) confirmed to BusinessDay at the weekend.

Femi Fabanwo, Director, Other Financial Institutions Department of the CBN, confirmed that the operational guidelines for the fund were being finalised and would be presented to the apex bank’s management soon, for approval. The fund is expected to be co-funded by government, the CBN, as well as the private sector, Fabanwo explained.

It would be recalled that the CBN had announced that it would set up the fund to hopefully improve access to affordable and sustainable finance by microfinance institutions and microfinance banks.

That promise was also repeated earlier this year, at the apex bank’s sixth Annual Microfinance Conference and Entrepreneurship Awards, held in January, raising concerns among operators of microfinance institutions who have been hoping to draw on the fund to expand their businesses.

Explaining the delay, Fabanwo said the apex bank was carefully drafting the guidelines to ensure that the fund would serve its purpose when finally rolled out.

He also confirmed that the fund would have several windows, including commercial and social components, in order to enhance its operations and outreach and that it would also support capacity building activities of the MFBs and MFIs.

According to him, the fund’s operational guidelines would be benchmarked against global practices which according to him, would mean that the international community, especially the multilateral agencies may be invited to make input to the document.

Announcing the proposed fund last year, CBN governor, Sanusi Lamido Sanusi had explained that the apex bank was working on deepening the financial markets through the introduction of new products and appropriate control structures.

He also noted that the MDF when established, would assist in addressing teething challenges of underfunding for microfinance institutions in the country.

It would further complement past and current efforts aimed at strengthening the microfinance sub-sector of the financial system, improve financial inclusion and by implication, improve the nation’s Gross Domestic Product (GDP) rate significantly, the governor had stated.

From Business Day Online The Central Bank of Nigeria (CBN) says it has developed an exposure draft on Financial Inclusion Strategy to improve the percentage of Nigerians key into the cash-lite policy. The bank disclosed this in a statement issued by the Development Finance Department and posted on its website on Wednesday. It said that the development... 

From This Day Live The Central Bank of Nigeria (CBN) has said it had developed a strategy aimed at reducing the percentage of Nigerians excluded from financial services from 46.3 percent as at 2010, to 20 percent by 2020. As a result of this, the apex bank said it had developed an exposure draft on financial inclusion strategy for Nigeria. The draft,... 

From Leadership, Nigeria The National Association of Micro finance Banks (NAMB) said on Wednesday in Abuja that microfinance banks improved the country’s Gross Domestic Product (GDP) by 3 per cent in 2011. Alhaji Kabir Yar’adua, NAMB’s Executive Secretary, said this in an interview with the News Agency of Nigeria (NAN). Yar’adua... 

From Leadership, Nigeria

The National Association of Micro finance Banks (NAMB) said on Wednesday in Abuja that microfinance banks improved the country’s Gross Domestic Product (GDP) by 3 per cent in 2011.

Alhaji Kabir Yar’adua, NAMB’s Executive Secretary, said this in an interview with the News Agency of Nigeria (NAN).

Yar’adua said that the association was doing all it could to ensure that it stepped up the its GDP contribution to At least 20 per cent.

“The intention is for the contribution to be up 15 to 20 per cent. We have a long way but surely we are going there. All indicators are pointing to that direction and don’t forget recently the Central Bank sanitised the sub-sector.’’

Yar’adua said a number of factors were working against the realisation of the objectives of the micro finance banks and gave the assurance that the association would do all it could to address some of the challenges.

He said that the inability of people to differentiate between microfinance banks and microfinance institutions was affecting the operations of microfinance banks.

“There is a lot of mistrust from the public; public don’t trust microfinance banks because they don’t know the difference between microfinance institutions and microfinance banks.

“We have microfinance institutions that get registered at the Corporate Affairs Commission to operate as cooperative societies or microfinance institutions.’’

He said that the mistrust had impacted negatively on the members.

According to him, no company has the right to canvass for deposits from the public without first obtaining licence from the central bank.

He suggested that Federal Government should introduce a kind of intervention fund to the microfinance industry just like it has done in other areas of the economy.

According to Yar’adua, the association has been meeting with the Central Bank of Nigeria (CBN) to set up the Microfinance Banks Development Fund.

He said that the fund would empower the micro and small enterprises, being the engine of growth of any economy.

By George Ngigi, Business Daily Africa Microfinance institutions (MFIs) are set to begin submitting names of loan defaulters to credit reference bureaus next month, further locking out bad borrowers from the accessing debt. The micro-financiers will only share the data among themselves in the early stages of the initiative, while waiting for the... 

By George Ngigi, Business Daily Africa

Microfinance institutions (MFIs) are set to begin submitting names of loan defaulters to credit reference bureaus next month, further locking out bad borrowers from the accessing debt.

The micro-financiers will only share the data among themselves in the early stages of the initiative, while waiting for the law to be reviewed to allow them to open up their data to other credit providers.

“We are working with a June target for our members and September for the industry as a whole,” said the CEO of the Association of Microfinance Institutions (AMFI), Benjamin Nkungi.

MFIs have been seeking to access information held by credit reference bureaus on serial loan defaulters on fears of giving credit to blacklisted borrowers, who turn to them after being locked out by banks.

Commercial banks have increased their usage credit bureaus to lock out defaulters, making MFIs vulnerable to such borrowers.

Mr Nkungi said that they will be relying on the fact that the Micro-finance Act of 2006 does not outlaw sharing credit information to blacklist defaulters.

He, however, acknowledged that the law is not clear on sharing of customers’ information, which is considered confidential.

“There will be need to change clauses on the loan application forms to get consent from borrowers and to offer financial education so that they can understand the benefit of this system,” said Mr Nkungi.

Credit information sharing is meant to reward good borrowers by giving them a bargaining tool for lower interest rates and lower collateral requirements.

Lack of robust information systems is also a challenge to micro-finance institutions, with the association stating that some of them use excel sheets to compile their data.

“For institutions that do not have resources to invest in IT infrastructure we are going to use cloud computing platform-where you pay for use. We are already discussing with a few providers,” said Mr Nkungi.

Consultants hired by the association also said the practice by microfinance institutions to push guarantors to settle loans in default exposed the system from failing to capture some serial defaulters.

Most of the institutions give loans to members of a group who co-guarantee each other. In case of defaults, other group members are expected to settle the loan balance.

The minister of finance last year proposed review of the Banking Act to allow information sharing between banks and deposit taking microfinance institutions.

There are six deposit taking micro-financiers in the country compared to 43 institutions that are members of AMFI.

By Hope Moses-Ashike, Business Day Online Loan defaulters in Micro Finance Banks (MFB) have continued to enjoy an unexpected reprieve as the Central Bank of Nigeria (CBN) is yet to establish a special court to try suspects, over one year after it pronounced it would do so. This has raised concern among operators of micro- finance banks, as the... 

By Hope Moses-Ashike, Business Day Online

Loan defaulters in Micro Finance Banks (MFB) have continued to enjoy an unexpected reprieve as the Central Bank of Nigeria (CBN) is yet to establish a special court to try suspects, over one year after it pronounced it would do so.

This has raised concern among operators of micro- finance banks, as the delay is negatively affecting their activities.” Some loans that would have been recovered if the special court had been established are already going bad. Operators are desperately looking forward to instituting such special court because it will send a signal to loan defaulters to pay.

Olufemi Babajide, chairman, National Association of Microfinance Bank (NAMB) Lagos State chapter, said the

Sub-sector needed the special court as quickly as possible.

According to him, the delay in setting up the special court is drying liquidity in the industry.

He explained that there are cases of borrowers not wanting to pay, even when they have the ability to pay.

They have been taken to court, and the court keeps adjourning the cases. “So we need a special court that can treat cases of microfinance banks within 30 days. If there is a special court, they will pay up,” he said.

Loan repayment has been a major problem in microfinance banking in the country and across the globe. !ere is no doubt that some microfinance banks have closed shop because they were not able to recover the loans given to their customers.

In Lagos State alone, over N10 billion is being owed by these micro depositors who borrowed money from their

various institutions. Babajide had expressed displeasure over the attitude of these beneficiaries, saying it would prevent other poor but economically active people from benefiting from the micro credit scheme.

To Ade Adesina, general manager operations NPF Micro finance Bank Plc, Lagos, banks’ attitude in the area of non-payment of money can kill any financial institution.

“This attitude cannot make business to thrive. It can kill any financial organization no matter how big or financially buoyant any organization might be.

The CBN February last year said it had sent a bill to National Assembly in respect of that. The special court unlike the conventional one would ensure quick resolutions of cases on loan defaults and encourage banks to give more loans.”

The conventional courts and other established organs do not possess absolute rights to deal with cases of loan defaults. Besides, the conventional courts are over congested and by the time judgments are passed, the loans would have gone bad.

According to the regulatory guideline for microfinance banks by the CBN, a microfinance loan is a facility granted to an individual or a group of borrowers whose principal source of income is derived from business activities involving the production or sale of goods and services. !e maximum principal amount shall not exceed N500, 000 or/and as may be reviewed from time to time by the CBN. Generally, a microfinance loan is granted to the operators of micro-enterprises, such as peasant farmers, artisans, fishermen, women, senior citizens and non-salaried workers in the formal and informal sectors. The said loans are usually unsecured, but typically granted on the basis of the applicant’s character and the combined cash flow of the business and household.

Ordinarily, the tenure of microfinance loans is 180 days (6 months). However, in the case of crops with longer gestation period, a maximum tenure of twelve (12) months shall be permitted. Microfinance loans may require joint and several guarantees of one or more persons.

From Vanguard IFC, a member of the World Bank Group, and The MasterCard Foundation today launched a partnership to increase access to financial services for an estimated 5.3 million people in Sub-Saharan Africa. Building on recent economic momentum and stability in many African economies, the project will create new opportunities for economically... 

From Vanguard

IFC, a member of the World Bank Group, and The MasterCard Foundation today launched a partnership to increase access to financial services for an estimated 5.3 million people in Sub-Saharan Africa.

Building on recent economic momentum and stability in many African economies, the project will create new opportunities for economically disadvantaged people to expand businesses, gain access to cost-effective financial services, and manage risk.

Through this new $37.4 million partnership, IFC and The MasterCard Foundation will help microfinance banks expand more rapidly and develop new products and cost-effective delivery channels, while expanding coverage in new, often hard-to-reach locations. The project will also help providers to deliver low-cost mobile financial services to low-income customers.

“Disadvantaged people derive real benefits from having more control over their finances, and our partnership with IFC will help bring responsible financial services to a significant number of people in Sub-Saharan Africa,” said Reeta Roy, President and CEO of The MasterCard Foundation. “As we scale institutions and support new mobile financial service opportunities, this partnership will also create knowledge that will be invaluable in promoting greater financial inclusion.”

The MasterCard Foundation has become a major player in the field of microfinance, particularly in Sub-Saharan Africa, having forged partnerships worth more than $230 million since its inception in 2006. To date, these partnerships have helped provide financial services to over a million people, and provided another two million with access to financial education.

The MasterCard Foundation partnership is IFC’s largest with a private foundation. “This partnership leverages IFC’s global expertise, local knowledge, and client networks to promote greater financial inclusion,” said Nena Stoiljkovic, IFC Vice President for Business Advisory Services. “It will help IFC clients do more for low-income customers in Africa.”

Since its first microfinance investment in 1997, IFC’s involvement in microfinance has steadily increased, and IFC is now one of the top three global investors in microfinance.

As of June 2011, IFC had directly committed over $1.2 billion in investments to microfinance projects globally, with more than 150 financial institutions in over 60 countries.

IFC invested early in mobile financial services, supporting pioneers such as WIZZIT in South Africa, and providing advisory support to MTN in Nigeria and Airtel in Madagascar. IFC’s portfolio includes six investments with dedicated e-payment service providers, and investments with financial intermediaries and mobile network operators offering mobile wallets.

IFC’s microfinance and mobile financial services programs in Sub-Saharan Africa have received support from the African Development Bank, Austrian Development Bank, the Swiss State Secretariat for Economic Affairs (SECO), and the governments of Austria, Denmark, Japan, Luxembourg, and the Netherlands.