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Lagos, Nigeria, January, 05 2009 - Despite the laudable attempts of microfinance banks to reduce the nation’s poverty level, not much has been achieved, perhaps as a result of limited funds available to the sub-sector. However, the growth of microfinance banks since their inception has demonstrated that the less-privileged can have access to financial services.
At present, there are approximately 815 microfinance institutions across the country, which try to meet the needs of citizens. In meeting up with their avowed obligation to empower low-income earners through micro-credit services, players in the industry face lots of challenges, which they would want the Federal Government to address this year.
These include: lack of finance and training, poor infrastructure, overhead cost, high interest rate, unequal distribution of funds, among others.
According to Victor Mfon, director of Business, Olive Microfinance Bank Limited, Lagos, there are credible microfinance banks that need government support. “Government can support us by using us as Special Purpose Vehicles (SPVs) to disburse microcredit so as to alleviate poverty,” he says.
While thanking government for establishing microfinance institutions, he suggests that there should be equal distribution of funds released by the Central Bank of Nigeria (CBN) to the industry.
His words: “I understand that there was a N50 billion arrangement sometime with CBN that was supposed to be accessed by microfinance banks. As of today, I am not aware of any microfinance bank that has been able to get such money,” he insists.
In a telephone interview with Laide Adebayo, chief executive officer, Kings Microfinance Bank Limited, he similarly points out that in terms of developmental funds; the sub-sector needs the Federal Government’s support.
He explains that the reason for high interest rate in the Micro Finance Institutions (MFIs) is lack of access to cheap funds. “The major reason behind the high interest rate in the sub sector is the fact that they don’t have access to cheap fund, and we are praying that government will be able to come to our aid in this. We have a lot of development funds that
we expect to access. By the time those funds are made available with very low interest rates, we should be able to lend lower than the big banks,” he says.
Adebayo as well recommends that individuals and corporate bodies within the society should contribute towards poverty eradication by making funds available to MFIs.
Another challenging area that requires improvement, he notes, is infrastructure, which he says is discouraging players from living up to their potentials.
Also speaking in a telephone interview, Omenuwa Dennis, managing director, Fetac 77 Microfinance Bank Limited, Lagos, insists that the industry needs government support in terms of availability of funds.
“We are not making any profit from the business. Individuals alone cannot run microfinance banks, so we need more money. Access to funds is very important,” he remarks.
BusinessDay’s investigations in 2008 revealed that a lot of small-scale business operators have benefited from micro-credit schemes provided by the MFIs. Mike Ezeji, managing director, Fish Farming, Lagos, is one of the beneficiaries of the scheme. He feels the importance of microfinance banks cannot be over-emphasised, considering the level of change he has experienced since he began business transactions with them.
His words: “I found them to be very enterprising, very understanding. We have been doing much better since the day they decided to work with us. They have been cooperating, assisting in very many ways, not only advancing funds.”
The only questionable aspect of microfinance, he explains, is high interest rate, which he advises MFIs to cut down on.
Mentor Effeffiong is a photographer based in Lagos. After his training, he had no camera with which to start out on his own. But through the support of one of the microfinance banks, he was able to acquire one.
“Without the micro-scheme, I don’t think I could buy the camera that I am using now for my business. My business is growing and I don’t have any problem,” he notes.
Daniel Ikeme, a spare parts dealer, is another beneficiary of the finance scheme. His opinion of MFIs is that, “They are meeting up with the needs of their customers in terms of loans and daily contribution.
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