Micro depositors want downward review of interest rate
The high interest rate charged by microfinance banks is a major challenge that needs to be addressed for the sub-sector to move forward.
Most microfinance banks are currently charging six percent interest rate per month on a reducing balance. This, however, has been attributed to high cost of fund by operators. Some micro depositors, who are aware of this, have called on the operators to review their interest rate downward to enable them repay their loan as and when due.
At the customers' interactive section during the commissioning of Ketu branch of Accion Microfinance Bank Limited, David Udom, one of the bank's customers pleaded with the bank to help them further by reviewing the interest rate downward.
He said he was impressed by the attitude of the bank's staff and their dedication to duty. Udom, who operates a cybercafé business centre, disclosed that he was able to access N120, 000 loan in less than one week of coming in contact with the bank.
Also Wasiu Akambi, one of the customers of the bank, who is a transporter, commended the bank for assisting him in his transportation business but demanded that interest rate be reduced.
Olufemi Babajide, acting chairman, National Association Microfinance Banks (NAMB), Lagos State chapter, had earlier noted that interest rate in microfinance bank is a challenge which cannot be reduced at present except there is an intervention by governments.
However, efforts are being made by the association towards getting the government and agencies support the sub-sector so that interest rate will crash.
"We have set up various committees. We have intervention fund committee that will sit down and come up with policies with criteria to access these funds. They will give us a blue print on how we can access these funds," he said.
A source from Central Bank of Nigeria (CBN), said interest rate for microfinance banks was deregulated because they have to cover their cost of fund.
"So, interest rate is deregulated. It is not like commercial banks or deposit money banks where they have a band between the deposit and the lending rate. But for microfinance banks it is deregulated. And usually, their customers are not really keen on whether the interest rates are high. They are more concerned with ease of assets to funding. Most of their customers cannot have access to credit from the regular banks", he said.
Across the world, interest rate in microfinance banks has been a major problem. For instance, there was uproar by the masses and subsequently government intervened in India over 24-30 percent interest rate charged by Private Microfinance Institutions (PMFIs) which is lower compare to what is charged in Nigeria.
Last November, it was reported that Andhra Pradesh, one of India's most populous states, cracked down heavily on PMFIs, banning many of their activities and telling borrowers they did not need to repay their loans.
