Nigeria: Challenges Facing Microfinance Institutions, By Operator
By Oluwakemi Ajani, Nigerian Guardian
Edward Akinlade is Managing Director of Prolific Micro finance Bank in Ogba, a suburb of Lagos. He is also Chairman of Suru Group Ltd, an organisation that is involved in hospitality services, real estate and construction services. In an interview with OLUWAKEMI AJANI, he spoke on challenges facing micro finance institutions in the country.
How would you assess microfinance banks in Nigeria?
They are doing their best considering that facing their operations. The smallest micro-finance bank in Nigeria today has just N20m for all its operations, including lending. They don’t have enough funds to carry out their mandate effectively. I think the Central Bank of Nigeria (CBN) should assist by giving them funds to enable them carry out their operations. Though they are talking about that but it has not executed.
Generally, if you look at what has happened in micro-finance banking in the last six years, it has been a catalogue of poor understanding by promoters of the banks because they venture into it to make money.
Micro finance banking is not a sector where you make money; it social responsibility business. The focus is to assist people, especially small and medium enterprise (SME) by giving them loans to do their businesses. Many micro-finance banks failed because their focus is to make money; that is where we get it wrong in the past. Moving forward, I think those still existing now understand what the business is all about. I understand that at the end of this year a lot of micro-finance banks will have to close shops because of newly proposed minimum requirements CBN is introducing.
Has the Central bank given incentives to micro-finance bank?
At the moment, there is no direct funding from the CBN. But operators can go into inter-bank market to borrow money for their operations. But CBN subsidizes training for directors of the banks. Non-executive directors, for instance, in two weeks ago were sponsored by CBN and NDIC on training. The total cost on each participant was N75,000; we paid N30,000 while CBN and NDIC took care of the balance.
What has been the contribution of micro-finance banks to the growth of SMEs?
We are doing a lot. None of the commercial banks has lent to individual a penny without a collateral. But micro-finance banks are doing that because they are close to market women and petty traders. In my bank, we do give out free cash to petty traders every month to do their business. We also give them loans within our cash limit. We do this on a monthly basis because we believe these people create job.
Apart from funding, what other challenges face the industry?
Manpower is another big challenge facing the sector. There is paucity of skills among people who are running the banks. There are illiterate people who are directors of the banks.