Microfinance banks in Nigeria
The industry is growing and rapidly too; and there are some pacesetters like LAPO which is leading and they are showing example through their operations. There are also NGOs that are taking the lead showing people the way of doing microfinancing.
The industry also has a lot of difficulties, for example, it has been difficult until now to inject funding. Most organisations do not have enough resources (no funding to give to their clients). They have very low loan portfolio. If you are a microfinance bank and you want to serve the people and you do not have access to funding then it will be difficult to reach more people. That is one of the problems I see in the industry. Although they can mobilise savings but that is not enough to serve the clients.
In Nigeria, one of the problems also is foreign exchange risk. As a result, it is difficult to access foreign funding. So, funding is one of the problems microfinance institutions are encountering in this country. One of the solutions is to take local currency loans. The more microfinance institutions are able to lend to people, the more they are able to cover the cost and to make profit. If you have few clients that means you have more administrative cost and less profit.
We have 98.8 percent low repayment rate. Our default rate is 1.2 percent. Women and youth as target market .
Loan recovery method
We apply normal recovery method. We have not had any legal chase on non repayment. We have not used the police to chase after people. It is just the normal pressure. This is because they are most vulnerable. There is a fund we have applied for now from the European Union which focuses on gender inequality.
It is investing in people but particularly, gender inequality. Through this project, we want to empower women because they are the most vulnerable people in the society. If you talk about poverty in the communities and villages, women are most affected and that is why we want to empower them and then create opportunities for them to be able to live.
Transforming to microfinance bank
We are not afraid of transforming. We need to meet the minimum requirement first before transforming. Then the second thing is that we have to look into our objective to see if transforming will add extra benefit to us in serving the people at the bottom of the pyramid. If it is the way to serve them better, then we transform. The board has to look at that and devise means of doing that.
We also have to consider the implication of transformation because transformation is not just getting the certificate; there are so many things involved such as the cost, minimum capital among others. We have to weigh all these things, if we have all the resources and we are in a good position, the board considers it and the general assembly says we are ready to do that, then we do it.
Funding. We need to have avenues of bringing funding to address or to serve the people at the bottom of the pyramid. And we need to cover the cost because we have more cost bringing these services to the rural communities, so funding remains a huge problem. I imagine also that in the future, we will be fighting with low repayment rate.
Funding microfinance banks
We create linkage opportunities. We bring investors to invest in microfinance banks. We do not have our own fund but we create this linkage opportunities, that means standing in between the banks and the investors. For example, there is a survey we are doing now with a German consultancy firm to make a survey of microfinance banks in Lagos to check their capability and capacity.
The end plan is to offer them technical assistance on the area they are lacking. If we make this assessment, we enter into a relationship with a bank. We do a kind of institutional evaluation. We want to know what their needs are. By the time we figure out this, we try to bring in consultants to address the specific problems that they have, once they have resolved these issues, we invite rating agencies to give an independent opinion about such bank or the financial institution. Once we have done that we begin a discussion with investors.
We have a plan this year to work on a platform to gather funding through the internet from different sources – individuals and organisations and then we can begin to channel the funds to organisations but for now it is in the pipeline. We are discussing with organsiations that will partner us to do this. We have started discussion with a German company. It is in our thinking and planning to have a project that would assemble a pull of fund together and give to, may be, not to microfinance banks but to grassroots organisations like cooperatives or to microfinance banks that deal directly to the people at the bottom of the pyramid.
Micro Investment Consultancy Services Limited (MICS) is a social enterprise consultancy firm specialising in consultancy and advisory services to various actors dedicated to eradicating poverty in Africa. We seek to link micro, medium and small enterprises (MSMEs), credit unions, co-operative groups, rotating savings and credit associations (ROSCAs), women’s groups, and microfinance institutions (MFIs) with public and private funding sources and to provide technical assistance and capacity building strategies for improved efficiency and greater outreach. Our vision is inclusive and sustainable economic development through social and market-based solutions.
MICS is registered in Nigeria under the Corporate Affairs Commission and in Ghana under the department of company registry as Micro Investment Consult Ltd. It operates through a network of highly experienced local and expatriate consultants with offices in Nigeria, Ghana and Germany.
The Organisation for Communal Welfare and Development is a non-profit and non-governmental organisation founded in 2003. In 2009, it became formally recognised and registered as a charitable NGO by the Corporate Affairs Commission of Nigeria.