By Graham Orodje Microfinance in Nigeria has struggled to achieve the objective of providing affordable loans to Micro enterprises and entrepreneurs. Many reasons have been identified for this failure, ranging from lack of capacity to high default rates. Central Bank of Nigeria (CBN) has introduced several initiatives and legislation to improve... 

By Graham Orodje

Microfinance in Nigeria has struggled to achieve the objective of providing affordable loans to Micro enterprises and entrepreneurs. Many reasons have been identified for this failure, ranging from lack of capacity to high default rates.
Central Bank of Nigeria (CBN) has introduced several initiatives and legislation to improve the sub-sector. These include the creation of three tier system based on capital. CBN recently amended its Microfinance guidelines and gave State Governments authority to create state owned Microfinance Banks. Is this likely to lead to positive growth in the sub-sector or will State controlled Microfinance Banks become ‘white elephants’?

Government are not traditionally good managers of commercial businesses in their remit. They lack the commercial discipline to make successes of commercial enterprises. Governments at various levels, including national, state and local are heavily bureaucratic, cumbersome and slow in decision making. In the last two decades Governments around the World have recognised their shortcoming and have largely disposed of commercial enterprises to other private sector businesses. This suggests CBN’s decision may not yield the desired result.

The funds State Governments are likely to earmark for creating State controlled Microfinance Banks can be utilised in ways that can enhance the sub-sector.

It has been widely reported that many Microfinance Banks are having difficulties obtaining debt and equity funding. State Governments can create cheap and easy to access loan funds. This should provide Microfinance Banks with the ability to provide loans at lower interest rates and increase their customer base. A further option is the creation of a Loan Guarantee Scheme. It should make it easier for State and Local Microfinance Banks to obtain loans from commercial providers. These two schemes and similar schemes are likely to have better impacts on the growth of Microfinance in Nigeria than the introduction of State owned Microfinance Banks.

By Graham Orodje Prior to CBN’s intervention, Microfinance in Nigeria was taking a swift decline into the abyss. The sector was riddled with fraud and mismanagement of funds. Some of the mismanagement may have been down to a lack of understanding of Microfinance by the senior managers in some of the Microfinance Banks. This assumption was corroborated... 

By Graham Orodje In March the Ag Chairman of Lagos National Association of Microfinance Banks (NAMB) Mr Olufemi Babjide announced that 183 Microfinance Banks (MFBs) had applied for access to the Lagos State Microfinance Institution (LASMI) fund. LASMI must be commended for making funds available to MFBS to enable them to continue lending to those... 

// By Graham Orodje - I wrote an article in 2010 entitled ‘State of Microfinance in Nigeria’. In it I highlighted some of the issues affecting Microfinance in the country, from the haphazard manner in which Microfinance was introduced into the country, to the grandiose ambitions of some MFB directors and embezzlement of depositors’ funds. ... 

By Graham Orodje - Until the reported crisis, investment in Microfinance in India was seen as very attractive by many equity providers. Massive investments went into some of the biggest Microfinance Banks in the country. Some of the investments achieved tremendous rates of return. This was particularly true of SKS Microfinance investors following... 

By Graham Orodje, Editor Microfinance Nigeria - I read and republished an article on this website entitled ‘Depositors Always Suffer’. In it the article claims CBN should be blamed for the current problem engulfing Microfinance in Nigeria. The article also claims that the problems are as a result of CBN’s policy. Please read the article on... 

By Graham Orodje, Editor of Microfinance Africa - Since the cancelling of 224 Microfinance Banks there have been numerous articles on the issue. Many of the articles blame the CBN for the state of Microfinance in Nigeria, but is this justified? When Licences were granted to MFBs, there are levels of expectation and responsibility that is expected... 

By Graham Orodje, Microfinance Africa - As the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC) continue to untangle the mess created by Microfinance practitioners, there is renewed optimism that the sector will finally fulfil its potential. There is little doubt that the investigations undertaken by the CBN... 

By Graham Orodje, Editor of Microfinance Africa - The CBN and NDIC continue to attempt to clean and resurrect Microfinance in Nigeria. Many of their initiatives have met with positive response from the sector. There is strong belief that many of the initiatives will turn the sector around, although some have met with resistance. There is also increasing... 

By Graham Orodje, Microfinance Africa – Nigerian Microfinance industrry appears to be stumbling from one crisis to another, ranging from accusations fraud to embezzlement of depositors funds. There are now many Microfinance Banks (MFB) facing financial difficulty and potential liquidation. A large proportion of the current problems been faced...