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Omodele Adigun
“What exactly are the operators and stakeholders in the microfinance banks (MfBs) sector supposed to be doing? What are they made to achieve?” This is a multimillion Naira question posed by Mrs Tokunbo Martins, the Director of Other Financial Institutions Supervision Department of the Central Bank of Nigeria (CBN) at a public forum recently, while x-raying the not-so-inspiring performance of the MfBs.
She continued : “They are supposed to take people out of destitution; They are supposed to contribute to poverty alleviation; they are supposed to help people at the bottom of the social ladder; the destitute, the vulnerable, the desperate, the weakest people in the society. That is what they were made to do!”
But Unfortunately, their failure to perform these roles has led to the birth of new MfB:the NIRSAL National Microfinannce Bank, to take over these functions.
Mrs Martins disected its expected roles and mode of operation in this interface.
NIRSAL MfB
In order to address these gaps, the CBN facilitated a strategic dialogue, (between stakeholders) which resulted in the approval for the setting up of a new National Microfinance bank; NIRSAL Microfinance Bank (NMFB).It is an initiative of the Bankers Committee in collaboration with strategic partners; the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), and the Nigerian Postal Service (NIPOST).
The bank is designed to drive and deepen financial inclusion; provide easy access to credit and other financial services to SMEs; reduce unemployment rate in the rural areas; and reduce rural-urban migration.
The bank aims to transform the microfinance landscape by providing easier access to affordable funds for small business owners. The bank will largely operate as a FINTECH.
These services will facilitate wealth creation, increase employment and poverty alleviation – ultimately contributing to the growth of the economy.
Ownership structure
The Bankers’ Committee: 50 per cent; NIRSAL, 40 per cent and NIPOST 10 per cent.
Its initial paid up capital is N5billion.
The bank will leverage on
NIPOST’s geographical reach; NIRSAL’s credit de-risking infrastructure; Bankers’ Committee’s funding as well as adoption and deployment of cutting edge technology in order to quickly meet the needs of its target market – Nigeria’s MSMEs.
Objectives
Its objective is to enhance financial inclusion; create jobs and enhance the skills of citizens in rural communities. It is also to provide access to cheaper credit and other financial services for small-holder farmers. All these aim to improve and grow the economy
Outlook
The CBN initiated a Microfinance Policy to ensure market discipline and create a competitive environment aimed at maintaining soundness within the sub sector.
The key objective of the Microfinance Policy Framework is to make financial services accessible to a large segment of the productive but financially excluded population.
The policy is aimed to promote innovative, rapid and balanced growth of the industry, leveraging global sound practices.
The pertinent objective of the revised framework is to increase financial inclusion rate in the country, improve access to financial services for the active rural poor and pursue poverty eradication.
Achievements
Financial inclusion has had a positive effect in Nigeria as the exclusion rate reduced from 53 per cent in 2008 to 46.3 per cent in 2010 and 36.8 per cent in 2018. In spite of the plethora of challenges, several opportunities exist within the sub sector. The growing entrepreneurial awareness, increased government interest, large unbanked rural area and high population of poor people.
The microfinance sector has continued to grow, attracting several players and service providers, offering diverse services.
Repositioning the subsector for better service delivery especially in the wake of emerging digital age is crucial.
The CBN envisions a viable and sustainable microfinance sub sector that will be market-oriented, where the private sector plays the major role and the government provides enabling environment through appropriate strategies and institutional policy framework
The CBN initiated a Microfinance Policy to ensure market discipline and create a competitive environment aimed at maintaining soundness within the sub sector.
We have population of 190 million The World Bank says that over 50 per cent of this live in poverty. The microfinance policy came into being for reasons such as this.If you have such a huge population but many of them are living in squalor, what can you do to improve the quality of life, the standard of living and the output of the nation generally”
Performance
Out of the 36 million micro enterprises that we have.I don’t want to repeat the importance of borrowing. If you have a very good business that is profitable, you can amplify that profit by borrowing more to expand that business as the cost of that borrowing is less than the returns you get on that business. Imagine where these small businesses that make profits where they are would be if they get much more credit and put into that business., amplify that business, improve the quality of life, improve the living standard, contributing more to GDP, economic growth and economic development. But unfortunately, they have not been able to receive the kind of credit that they require. That is why the National Microfinance Policy that came out in 2005 was enacted.
What exactly the operators and stakeholders in this sector are supposed to be doing? What are they made to achieve? They are supposed to take people out of destitution; they are supposed to contribute to poverty alleviation; they are supposed to help people at the bottom of the social ladder; the destitute, the vulnerable, the desperate, the weakest people in the society.That is what they were made to do!
And so the CBN looked across the world and chose the best practices, from cutting edge technology to come up with policies to help our own nation.And this was the policy that was supported by the World Bank.So we came up with this policy that gave birth to the microfinance banks.
The policy is to serve as a guide for the activities of the operators in the microfinance sub-sector. It is to ensure that the operators are guided by the rules , principles and a robust legal framework.
But some of the microfinance banks after getting the licence, they started doing other things. We have seen some that are trading in oil and gas. The owner of the microfinance is the only depositorThe rest of his stocks are in oil and gas.
The following targets are in the Microfinance Policy of 2011.But what we had hoped and what we worked towards was to increase access to financial services by 10 per cent annually. We didn’t achieve that. But at least we did something. And the good thing is that when you tried and tried, one day you get it right. What we had is that there was an increase of 17 per cent between 2008 till date and an increase of 4.8 per cent between 2016 till date, which is something. It means that what we are doing is having effect. What we need to do is to refine it more and more until it has exactly the effect that we want., or maybe the target is too ambitious, we don’t know.
Another target:The increase in share of micro-credit as a percentage of total credit from 0.9 per cent in 2005 to 20 per cent in 2020. Well, we are not in 2020 yet , currently, if you are looking at outstanding credit as at September, 2018, it is 4.9 per cent. We are working on the figure to make sure that we improve on it. If you are looking at the total credit that the mfbs made it 2018, it is 5 per cent
We targeted to increase the share of microcredit as a per centage of GDP from 0.2 per cent in 2005 to 5 per cent in 2020.Currently we have doubled where we were in 2005 to 0.4 per cent..Various challenges did make it possible for us achieve better than this.
On gender disparity, increase women’s access by 15 per cent annually: Well, I don’t know whether the increase is by 15 per cent annually. But look at statistics as at today: The number of credit customers that the microfinance banks have is six million. Sixty three per cent of this are women; men 37 per cent. In fact there are some MFBs that lend only to women. But when you look at the total amount granted, about N900million last year, 55 per cent of that went to the men and only 45 per cent went to the women.
Financial inclusion has had a positive outlook in Nigeria. The exclusion rate has reduced from 43 per cent in 2008 to 36.8 per cent in 2018.There is an increase use of MFBs from 1.9 per cent in 2016 to 3.3 per cent in 2018.
Between 2014 and 2018, total assets of MFBs have doubled; shareholders’ funds have doubled; profits have almost doubled; loans have also doubled.
We want people to know that CBN is working tirelessly to clean up the industry of the bad so that those that are doing well can grow and multiply to the benefit of all of us.
The Credit Reference Bureau, the National Collateral Registry and NIRSAL.. because the reason why they don’t want to lend is because of the risks
Capital requirement
The new minimum capital requirements is the third version of the Microfinance policy.It will soon be released, The reason we have to increase it is because of the huge capital obligations of the MfBs. If you have the capital base of N20million, th maximum that you can lend out is N200million. If you have the capital base of N5billion, that is the new capital base for national, you can lend out up to N50 billion. What you need do is to multiply the capital base by 10.That is what you can lend out.
