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The microfinance banks are facing more difficult times as they manage their liquidity positions and also endaevour to cope with the increased yuletide withdrawals by their customers

The season of Christmas is a period of increased expenditure for households’ especially Christian households. As this year’s Xmas approaches many persons would frown at any situation that would threaten their finances and hinder them from making the necessary expenses. The case of persons who have their monies kept at some of the micro-finance banks mired in crisis throws up the challenges some Nigerians may have in this forthcoming yuletide season. For the MFBS its tough times for them. One of the MFB operators who pleaded anonymity disclosed that withdrawal has intensified since the Sala celebration, “customers are withdrawing their money and the banks closed their door against us. It is a big challenge. We do not know what to do”, he says. But Uche Ubani, managing director, Peniel Microfinance Bank Lagos, believes that banking is continuous process, as some customers are withdrawing their money, others are depositing. He explains that “as long as the process continues, I do not see any challenge”. He sees the development as being more challenging to those who are already having problems. He is of the opinion that “every bank management is in the business of managing liquidity, managing of deposit, managing of loan. Uche Ubani believes it is a challenge every bank management will put head together to tackle. Prior to this period, a lot of microfinance banks were faced with liquidity problem, which has led to some of them closing shop. No doubt the economic crises adversely affected the operations of microfinance banks in the country, which necessitated the immediate intervention of the Federal Government. As it were, foreign support and lending from commercial banks to MFBs have dried up as a result of the melt down. The implication of this development is that microfinance banks were left with the option of sourcing for credit locally to cover up the finance gap.Consequently, some microfinance banks set up to empower the active poor through providing them with micro credit and employment, laid off some of their workers in order to cope with the financial crisis. As a result of this crisis, poverty meant to be reduced through these micro credit institutions was rather enhanced. The current situation cannot be compared to that of last year which marked the beginning of microfinance banks operation in the country. Then price of oil was $147 per barrel, naira was exchanging for about 118 per dollar, stock market was yet booming and there were more funds for the industry to lend to the downtrodden. However, the Central Bank of Nigeria (CBN) has done a target examination of microfinance banks in Lagos and issued a directive to operators to shore up their balance sheet within a specified period. Meanwhile, it has been reported that the CBN has reiterated that it would not bailout any MFB that goes distressed; rather it would pay off depositors. Godwin Ehigiamusoe, executive director, Lift Above Poverty Organisation (LAPO), says if properly organized and managed, microfinance banks ought to maximize their benefits from the business boom associated with Christmas. To deal with withdrawal, he says they need to pay attention to liquidity management. Responding to the challenges of microfinance banks generally, Sunday Akhamiokhor, managing director/chief executive officer, Support Microfinance Bank admits that the challenge is mainly on risk asset creation. He notes that “a lot of us have given out money that we cannot recover. It could have been tackled if there had been a wider spread of risk asset created – meaning that the microfinance banks should have given more micro loans than the bulk sums they give to individuals,” he says. However, Eniola Agbesoyin, chief operating officer of Olive Microfinance Bank, describes the current crisis in the financial sector, which includes microfinance banks as a global one, which has escalated so much in Nigeria within the last two months. He says that “if you look at what is happening in the financial sector today, which includes the CBN intervention coupled with the global meltdown, a lot of customers are already having doubt in the financial sector. Eniola remarks that this has been the peculiar challenge we are facing because of the society we are in. The present scenario is that where customers have been making panic withdrawals because they feel that their money is not safe. Eniola regrets that the progress made in making people who had been keeping their monies in their houses to save them in financial houses may be reversed if things go awry. Eniola reveals that what most of the operators are doing presently is to talk to their customers, enlightening them that the current happening is not something that will make them lose their funds rather it is sanitization being done by the Central Bank of Nigeria (CBN) and the global meltdown that happened everywhere in the world, and it is going to be for a while. The unfolding crisis in the MFBS resulting to closures and customers lack of confidence in MFBs generally in addition to the credit squeeze in the banking sector blows no good for customers. And in this season of expenditure, customers are in for difficult times. These times call for prudent management of funds. Customers of MFBs who spoke to BusinessDAY reveal that they are making frantic efforts to get their monies from their MFBs and take care of their seasonal expenses.