Nigeria: MFBs push for more funding windows to close liquidity gap
While waiting for the launch of Micro Small and Medium Enterprise (MSME) Fund, formerly Microfinance Development Fund, next month, microfinance banks in Lagos State are devising other means of getting finance to support one other.
This time, the National Association of Microfinance Banks (NAMB), Lagos chapter, is making arrangement to constitute Microfinance Money Market Association (MMMA), aimed at providing short term liquidity for its members.
According to Valentine Whensu, chairman of the association, MMMA was an initiative of Lagos Island Local Government unit which the state chapter wants to improve upon.
“In order to give credibility and to get the members required, Lagos State chapter is to improve on the Lagos Island unit initiative. We thank them for this development”.
Apart from the new initiative, MMMA, the state chapter of microfinance banks had earlier established a Trust Fund known as NAMBLAG Trust Fund. The Fund was aimed at closing the liquidity gap in the sub-sector and offers the micro business operators the opportunity to have access to cheaper funds.
Three years ago, Inter-bank market for MFBs was launched. It was envisaged by Financial Derivative Company in conjunction with the Kakawa Discount House aimed at providing an opportunity for increased mobility of funds among microfinance banking operators, reducing the cost of funding and improving the net interest margin by providing these micro credit banks with a solid funding base to address short and medium term requirements.
The Inter-bank market died with the crisis that hit microfinance banks in the recent past. The question now is, will this microfinance bank money market be sustained?
Responding to this, Whensu said the then Inter-bank did not work because there was no proper structure. “They did not register it. We are going to register this one. There is a structure that will involve collateral, our treasury bill. It is the body that will work with conventional money market. We are using Kakawa Discount House as lenders of last resort.
They did not have any lender of last resort. They did not have consultant that was piloting them. We are working with a consultant. We are ensuring that people don’t just collect money rather they must collatarise it until we get to the level that we can accept the risk. We are engaging CBN to back it up. We are going to register with CAC. If we go four or five, we are sure that it will survive.
“It was a Lagos Island initiative, but now, it has been taken over by state so it is the state that is doing it now because of number.
“We are going to engage with CBN in two weeks’ time and after that give or take, within the next one month, we will start. When we finish with CBN we will get all the approval necessary.
It is a state something. By the time we start, information will be made available on net for people to see how we are operating. You can go to Kakawa Discount House to get information. It is going to be an open transparent activity. The main purpose is to help our members for short term liquidity.”
Whensu assumed office as the state chairman after the successful election held in June 2012, with the commitment to ensure that the microfinance banking sector and NAMBLAG state are moved to an enviable position among other states in the country. He listed 10-point agenda to accomplish within his administration.
By Hope Moses-Ashike, Business Day Online