Nigeria: How Microfinance Institutions Compete With Conventional Banks

LAPO Posts N8.2b Earnings

THE recent massive collapse of microfinance banks in the country has been attributed to expensive operational style adopted by the institutions. According to Chairman, LAPO Microfinance Bank Ltd, Dr. Osarenren Emokpae, the widespread profligacy in the sector would continue to threaten its survival until a satisfactory level of expertise and understanding of the peculiarity of the industry is achieved.

At the bank’s first annual general meeting (AGM) held in Lagos last week, Emokpae noted that top managers of Nigerian microfinance institutions were mostly recruited from conventional and community banks where flamboyant style holds sway, and that regular trainings were required “to transform and make them adapt to popular expectations of micro financing business.”  He tasked relevant agencies and operators to tailor training programmes to address the misconception.

Analysing how the history of Nigeria’s microfinance banking has impacted on its modern practice and operation, Managing Director of LAPO, Godwin Eseiwi Ehigiamusoe, said the future of the sector depends on how fast the issue and related challenges are addressed.

He indentified huge population and enterprising nature of Nigerians as critical strengths that would drive the growth of the sector if concerned stakeholders move fast to address its challenges. He, however, dismissed the presumption that microfinance lenders could bridge the gap in the credit market, saying they “cannot match conventional banks in terms of funding capacity and expertise.”

According to Ehigiamusoe, the country requires integrated approach to address institutional and environmental challenges confronting microfinance banking, which is crucial for fighting poverty and related issues.

Between June 2010, when it obtained a license to operate as a modern microfinance bank, and end of 2011, LAPO advanced a total of N43.3 billion loans through its 269 business outlets across the country. Its gross earnings stood at N8.2b while profit before tax (PBT) was N2.1 billion.

Decrying its huge company tax, which stood at N1.17 billion, Ehigiamusoe said government was sincere in developing a robust microfinance sector that can address the credit need of small businesses.  He called for some waivers to ease the burden of high cost of operations on operators. He observed that no microfinance lender could give “affordable credit” requested by the business community as long as the operating environment remained harsh.

Nonetheless, it was disclosed that the bank is planning to push down its current monthly-structured interest rate from 2.5 per cent to 2.3 per cent. The managing director said the cost of its loan, which is said to be the cheapest in the industry, would be reduced further as the cost of doing business reduces.

SOURCE: The Guardian, Nigeria

Nigeria: LAPO Microfinance Bank disburses N20.5bn ($129M) in six months

By Alemma-Ozioruva Aliu, Nigerian Guardian

LAPO Microfinance Bank Limited, has disbursed N20.5 billion to its customers withn six months, “to make meaningful contributions to poverty alleviation and national development.”

This was disclosed by the institution’s Managing Director, Godwin Ehigiamusoe, while reviewing the performance of the bank in the first half of this year.

The disbursement profile showed that owners of micro and small enterprises received N20.2 billion, while N339 million was disbursed exclusively to food crop farmers.

Specifically, he said clients in South-West got the highest loan amount of N11.1 billion followed by South-South with N5.1 billion.

Similarly, LAPO clients in North-Central received N2.1 billion, South-East, N1.2 billion while North-West and FCT trailed with N699 and N374 million respectively.

Ehigiamusoe said the microfinance bank, in addition to economic support, also provided free micro-business management training, social and health empowerment services as well as awarded scholarships to needy children of clients.

He attributed the performance of the bank during the period to the commitment of staff and support from local and international partners adding that management has formulated a strategy, which is expected to increase its loan volume to fund agriculture and allied rural economic activities.