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Tag: MfBs

  • CBN: MfBs in 774 local councils coming

    The Central Bank of Nigeria (CBN) yesterday said it plans to establish Microfinance Bank (MfBs)  in all the 774 local government areas of the country.

    Its Governor, Mr. Godwin Emefiele, disclosed yesterday at Gwagwalada, Abuja while on a facility tour of Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) MfB, an agribusiness initiative which provides risk for framers.

    He said the capital base of the new NIRSAL MfB will  initially be N5 billion, stressing that the new initiative which is a collaboration among the Bankers Committe, NIRSAL and NIPOST will see to the establishment of seven MfBs in the six geo-political zones and the Federal Capital Territory (FCT).

    Thereafter, he said, the number will be scaled up to 50 MfBs which are expected to become operational in the second phase of the launch of NIRSAL MfB.

    The first seven branches to be opened will be located in Ibadan, Port Harcourt, Bauchi, Kaduna, Enugu and Lokoja in addition to the one in Gwagwalada Abuja.

    Emefiele said: “We are just inspecting one out of the first seven and we are scaling up to the next 50 in the next phase. We believe that before the end of this year, we would have moved substantially in making sure that they are set up and be able to provide finance to small businesses.  This is a collaboration  between NIRSAL, Bankers Committee and NIPOST and I want to say that we really need to set up MfB that will reach out to the unbanked.”

    The CBN chief lamented the lack of access to cheap finance by small businesses but noted that with the presence of an MfB branch in each local government across the country, the problem would be tackled.

    “The biggest problem small businesses always have is access to credit; and I am happy that with the establishment of this MfB which would be in at least one local government and we are talking about the 774 locations in all the country, we would be able to have a financial institution that will help deepen financial inclusion to make it easy for people to access credit particularly the small and unbanked people because we have always said that these are the very weak,” he said.

    The creation of NIRSAL MfBs across the country, he said “is to improve access to credit and the technology that would be used will be a FinTech.

  • NDIC begins verification of MfBs customers’ claims

    The Nigeria Deposit Insurance Corporation (NDIC) has started the verification of insured depositors of failed Micro Finance Banks (MfBs) claims so as to start payment, its MD/Chief Executive Officer, Umaru Ibrahim, has said.

    He said it is in fulfillment of the Corporation’s core mandate.

    Represented by the corporations’ Controller, Kano Zonal Office, Alhaji Bashir Nuhu, at the NDIC’s Special Day at the Kano International Trade Fair, the CEO said  from the records obtained so far, majority of the depositors, especially in the liquidated MfBs have less than N200,000,00 in their accounts.

    He added that the measure adopted by the corporation on MFBs will enhance financial system stability in subsequent periods, adding that the corporation has embarked on various public awareness campaigns in the media in order to forestall future reoccurrence.

    ”The corporation will continue to work closely, with the Central Bank of Nigeria (CBN) to ensure effective supervision of the banks so as to ensure strict adherence to rules and regulations guiding banking operations in order to protect depositors in the domestic financial system against flagrant disregard of extant rules by management of financial institutions.

    ”The collaboration with CBN will help to minimize occurrence of unlawful insiders dealings, weak internal control and overall non-compliance to prudential guidelines,” he said.

    Also, it earlier vowed to not only probe but prosecute all those behind the failure of the defunct Sky Bank Plc, so as to serve as deterrent to others.

    He said the NDIC adopted Bridge Bank option to resolve the failure of the defunct Sky Bank Plc, following the revocation of its operational license by the CBN.

    With this expert arrangement, he said the Polaris Bank was able to continue the banking operations in the 277 branches of the defunct Skye Bank, adding that about 6,000 jobs were saved and depositors have unhindered access to their deposits in excess of N949.60 billion as at June 2018.

  • ‘Devt finance institutions should soften funding terms for MfBs’

    The microfinance segment of the banking industry has continued to play a critical role in growing the economy. The sector is also in need of financial support from development finance institutions, especially in having access to cheaper funds. Managing Director/CEO, Accion Microfinance Bank, Taiwo Joda, says the finance institutions must re-examine its terms for MfBs to access funds. He spoke with COLLINS NWEZE.

    How would you assess the Microfinance Banking (MfB) sector in Nigeria?

    I think microfinance banking involvement in the financial sector has played significant role to act as a catalyst for economic growth especially on focus on cottage business of micro-entrepreneurs.

    If you look at recent United Nations (UN) reports that show Nigeria as unfortunate, you will realise that although we have achieved so much, there is still a lot more to achieve.

    The primary focus of MfB is to eradicate, or bring to barest minimum the poverty level. And is by making financing available to businesses that deposit money but banks have naturally found  that not very attractive.

    And to allow them have access to capital and financial education so that when they use these funds for their businesses, they can grow. And then, they also can become employers of labour. And I think that the over 1,012 microfinance banks that we have at the moment have successfully done and are still doing.

    I will say that microfinance banking industry has had significant sector impact, in the Nigerian economy and this has also gone ahead to affect the interest that developmental banks like the Bank of Industry (BoI),  Developmental Bank of Nigeria (DBN)  and the Central Bank of Nigeria (CBN) have shown.

    We also have organisations like the Bill and Melinda Gates Foundation and quite a number of them like the other financial institutions and others that are lending their support to microfinance banks for them to support the economy.

    You spoke about the high poverty rate in the country. Could you explain further?

    The UN report was supported by other reports. The Nigerian Economic Summit Group came up with report that shows that 42 per cent of Nigerians are living below poverty line.

    While that is damming in one sense, it also shows you that there is massive opportunity for the microfinance intervention to bring people out of poverty especially when you talk about the active poor.

    When I say the active poor, the people who are working, or doing petty trade and small businesses just need some level of funding to be able to bring them out of that poverty region.

    Does that mean that the microfinance banks are not doing what they are supposed to do?

    Do not forget that Nigeria is geographically big. So, when you look at the population, let’s assume, 180 million, if you take 180 million people and divide the number by the number of microfinance banks, you will see that each microfinance bank should be catering for over a million customers. That’s how massive the Nigerian demography is. It is not that the microfinance banks are not doing what they should do, it is that microfinance banks still have a lot of work to do. They will need access to capital, funds to be able to intervene in this market.

    The second thing is that if you look at the distribution, of the microfinance banks, so, you will realise that there are concentration of microfinance banks in some areas.

    That tells you that there must be deliberate attempt to support microfinance banks to spread across the nation.

    But most times, the concentration is always about where the banks can make profit. What is your reaction to that?

    Yes. It is also regulatory inclined. Among the 1,012 MfBs, over 70 per cent are Unit Microfinance Banks, which means each of them can open only one office.

    Accion Microfinance Bank operated regionally for close to 10 years and that meant we were only allowed to operate within Lagos because of the type of licence  we had. About two years ago, we became a National Microfinance Bank. So, we can take the good works we are doing in Lagos to other states in the country. Less than 12 of the 1,012 MfBs in Nigeria are national. So, that affects it.

    Licensing of MfBs should now focus on the areas where we do not have their presence and I think the CBN is looking into that. When we have quite a number of clusters, people should be encouraged to move to areas we do not have significant presence at the moment. Where we have quite a number of clusters, people should be encouraged to move to other areas we do not have significant presence.

    In business decision, judgement has to come into how you do your business and where you do your business. I cannot go to an area where I do not have local knowledge. I cannot go to an area where I do not have infrastructure support to do my business.

    But there could be some encouragement that ensure that people move into areas that ensure we meet the needs of microfinance banks.

    You talked about access to capital. How does that work together with development finance institutions?

    The DFIs partner with microfinance banks. DBN and BoI partner with microfinance banks. They have done their bits. This is a space that needs massive funding. There could also be some technical issues. As for access to funds, BoI and DBN will not just throw money at 1,012 MfBs. They also have to ensure that those banks are viable and are doing what they need to do; and that they are meeting their risk-acceptance criteria to be able to attract such funding.

    A few other issues that bother on access to funds is the demand by some of these development banks that banks must provide collateral to be able to access those loans to on-lend to their customers.

    Meanwhile, the role is to make funding available to the active poor, and to the entrepreneurs and individuals who are not able to approach the deposit money banks.

    One major factor is their inability to provide security. So, if you expect  microfinance banks to lend without security, then the major issue is why are the DFIs asking the microfinance banks to provide security to access funds from you and still take the credit risk? That also impact on how much is made available at every point in time.

    So, when you talk about they security they are demanding,  it is in form of what?

    Sometimes, treasury bills, and also cash cover and properties too. That is not clearly the risk methodology of some microfinance banks. In fact, as a microfinance bank, you should not be investing your money in properties; you should be using most of the money available to you for the purpose of working capital.

    So, what you see is that there is the willingness, but there are regulatory issues, that needed to be dealt with.

    So, you think these issues should be tackled regulatorily?

    I will say it should be tackled from the point of collaboration and understanding. I will not say anyone should legislate. But honestly, if DBN wants to give me fund to on-lend, they should be able to draw strength from by balance sheet; they should be able to draw strength from my pedigree; they should consider how I have operated; they should come and sit down and discuss partnership.

    Look at my risk methodology, my balance sheet, and ratios and get the best decisions and not that when we get to that point, you will find out that you are good for the loan, but without security, you cannot go ahead.

    Do you normally access funding from the World Bank?

    The World Bank hardly gives loans directly to microfinance banks. But they give through their subsidiaries and agent networks. We have the International Finance Corporation (IFC) which  has partnered with with a lot of microfinance banks. We also get some support from others.

    Do these institutions normally make security demand too?

    No. A lot more people will look at your rating, balance sheet size, ratios, and are able to make informed decisions and give you the loans. And I think that’s where we should come to in Nigeria and through the development banks.

    It is just like me trying to lend to the active poor and asking for property, cash-cover and all that. And it is not only IFC that has done that. We have had significant support from Citibank, Ecobank and these are organisations that believe in what you are doing and lend to you. And it is fantastic you asked that question because I do not want these people to come out and look as if they are the inferior lenders because if I am able to draw loans from these organisations based on my balance sheet. If you are now asking me, as a development bank, to give you securities, to back  these lenders.  BoI and AfDB fall within the DFIs.

    But I am probably aware that they have their risk-acceptance criteria, which we are not going to re-write for them. But we have to drive this process carefully to achieve significant milestone in the issue of provision of collateral.

    Accion Microfinance bank has done well in the last 12 years. What are the things that have kept the MfB ahead of others in the market?

    I think the greatest thing for us is focus. We knew what we wanted and we were focused in achieving them.

    The second thing for us, was that we deployed risk methodology that was in tune with the market that we serve. And our risk methodology is automated. We also have well-motivated and highly trained work-force. We take training as very key and we motivate them.

    Our high-level of ethics and corporate governance is also key as well as support from our shareholders. We have Accion international board that provides technical support yearly. We have Citibank, which sits on our board, and they bring global best initiatives to what we do. We have Ecobank International and IFC on our board. We have independent directors too. Also, Zenith International Bank. These are organisations that are highly committed to ensuring that we bring best in market practices to bear on what we do. I appreciate the massive support they have given to us.

    What are some of the products that are driving your performance in the market?

    We have the working capital loan, like the PayGo. We have a housing loan, and it has done very well. The product is made available for house construction, roof repair, renovation, electrification. it is a housing improvement loans. We also have educational loans made available to schools. Very very soon, we are going to launch a digital saving and digital loan products. And again, the success factor is not just about the products, but also the quality of staff that we have. Our greatest asset is our staff.

    Let’s move to one issue, the CBN has always talked about, which is Microfinance banks competing with commercial banks for market-space. What are your thoughts on this?

    You see, when a Microfinance bank goes into the commercial bank space as you cal it, it is like writing a death sentence. The risk number one is to define the market and operation. Commercial banks on their own, deal with large ticket transactions and bigger customers in terms of size. The market of commercial bank is so huge.

    For a Microfinance bank wanting to play in the space of commercial bank, it will face knowledge gap challenge. It is totally distinct. Microfinance bank must be clear about its vision, and define its market space. It is even the commercial banks that are encroaching on Microfinance bank space. Also, know that the risk perception in both markets is different and if you mix it up, it will not work.

    How fair-priced are your loans to small businesses?

    If we say that lending rates are high, it is a equation that sits in the minds of the analysers not in the borrowers’ minds. And I will explain.

    Most Microfinance banks probably charge between four to five per cent per month. And you accuse them of high interest rate.

    Let me give you an example. This woman sells rice. She needs N50,000 to do the business and at the end of the month, she pays N2,500 interest on that N50,000.

    That is not the critical reason why the business is failing. Because for that woman, if you bother to interview her, the cost of infrastructure is much higher than the cost of fund that the woman is using. Because of the bad roads, the woman has already paid N5,000 to transport a bag of rice. Because the infrastructure is not working, the woman is buying a four litter of kerosene that she will use in a day for N800 in a day. Multiply that by 30 days and you will see where the cost is.

    Because the infrastructure are not there, the hair-dresser has to buy a generator that is a non-earning asset. The hair-dresser has to buy four to 12 liters of petrol every three days to power the generator. That is high-cost of infrastructure. That is why business fails, not cost of finance.

    And I think we over-labour the issue of cost of finance. We have removed ourselves from where the issues are. The problem with development countries is not really as much as cost of finance, but cost of infrastructure. We need to focus on the cost of infrastructure. If I cannot move my goods that was financed by the bank, from the bank to town, without having extra cost because the roads are bad, because vehicles are even refusing to go to the site, it will be an overkill to think that it is the N2,500 cost of tine that is the problem with the business.

    I will tell you, when you tell a customer that you now have access to finance, it is an alternative to that customer. This is a customer that takes the N50,000 I mentioned and is even ready to pay N10,000 to do his business and it is cut down to N2,500.

    Take a deep breath and look at it again. What cost is really the problem? Is it infrastructure cost or finance cost.

    So, you are shifting the blame to the infrastructure cost?

    No. I am not shifting blame. It will be nice to give loans at single digit interest rate. We have given loans at single digit for the sectors that the Central bank of Nigeria partnered with us, especially on the educational sector.

    Beyond infrastructure cost, the perception of Microfinance, is still a high-risk segment. Microfinance banks are probably, the banking financial institutions that is loan-led. When you open a Microfinance bank today, if you go to a deposit money bank and ask for a loan, they will say run your account for six months.

    The cost of capital for the Microfinance bank is also high. So, you are lending from working capital. The individual who keeps money in commercial bank does not want token it at the same rate in the Microfinance bank. He wants something higher. If they are getting five per cent from commercial banks, they will want 15 per cent from the Microfinance bank and you want to cover your cost. Again, because of the small amount of loan that we deal with, we are labour intensive. That is why at Accion Microfinance Bank, we are driving a lot of products from the digital space.

    There is just so much an account officer can do. So, if you take a commercial bank, an individual is giving out N100 million, do you know what it takes for a Microfinance bank, who is doing N1 million or N2 million to give out a N100 million.

    If you give out a N100 million you are looking at 250 customers. One person cannot manage that 250 customers.

    But that customer is one customer to the commercial bank. There is personal and logistic cost that comes in with it. You a cost of mobilising funds. You have a cost of ensuring that customers are reached and it is labour intensive. Again, these are high-risk segments. You must price your loans to risk. There is a direct proportion between risk and return. So, you are taking high risk, then you should be expecting some level of returns.

    So, it is not just infrastructure. There are lots of costs that have come together. But I said that if you look at the cost to the bank and cost of going business, finance-cost as a proportion or ratio of cost of doing business is significantly very low.

    Now, how are you dealing with non-performing loans in your bank?

    First is to ask yourself, what are the causes of non-performing loans. It comes from either bad risk methodology, credit analysis and unwillingness to pay or extraneous factors. So, the first thing for us to ensure quality loans.

    Don’t book bad loans. If you do not book bad loans you will not get non-performing loans. We will continue to improve on our risk methodology and continue to train ourselves to ensure that our credit skills are improved regularly.

    This is supported by technology that we have put in place. The next is on unwillingness to pay which bothers on character.

    That makes it possible for us to deal with people that have referrals. When you want to take loans from us, we will ask for your referees. We also ask for guarantors for your loan. The third, which is also critical are other extraneous factors.

    All said and done, we still have bad loans and we also have debt recovery officers and they go about making recoveries with clear instructions not to infringe on customers’ rights.

    We have also created incentives to encourage customers to repay their loans. We let the customers know that if they pay back, the next loan will come with reduced interest rate. If you pay down on N300,000, you can attract N500,000 and so on.

    And some of our customers have grown up within that range to even get up to N10 million.

    What are your projection in the next five years?

    We are excited not just about the next five years but about the future. But what is clear is that in the next five years, we will be in the 36 states not just with one service outlet, but with many service outlets. In the next five years, we will be powered fully, by a digital solution and we will continue to be a dominant market for Microfinance banks. We are going to be clear on our direction, and we are going to build our customer base to above three million. And when I talk about three million customer base, I am not talking about dormant but active customers that will be borrowing from Accion Microfinance Bank. We expect a lot of good things to come from the Nigerian economy.

  • NDIC assures 100% payment of depositors in revoked MFBs

    The Nigerian Deposit Insurance Commission, NDIC, yesterday said  following the recent revoked licences of 154 MFBs and six PMBs by the Central Bank of Nigeria (CBN) due to their insolvency, from the record obtained so far, majority of the depositors especially in the MFBs, have less than N200,000 in their accounts, implying that the NDIC will  cover 100 per cent of the deposited funds in the MFBs.

    Making this known at the NDIC special day at the ongoing Lagos international trade fair, the Managing Director  of NDIC, Umaru Ibrahim, said CBN revoked the licences due to erosion of their capital base, poor liquidity, inept management, as well as some insiders helping themselves with loans they never intend to pay back, and further worsened by boisterous life style of Management that remained at variance with the philosophy of microfinance banking operations.

    “ The NDIC has commenced verification of insured depositors and will soon start paying the verified claims to appropriate depositors in fulfilment of our core mandate. From the record obtained so far, majority of the depositors especially in the MFBs, have less than N200,000.00 in their accounts, which implied that the NDIC will hopefully cover 100per cent of the deposited funds in the MFBs”

    “It is useful to inform us that, the NDIC, in collaboration with the CBN, adopted bridge bank option to resolve the failure of Skye Bank

    Plc. A bridge bank is a temporary bank created to operate a failed bank until a buyer can be found. The benefit of a bridge bank is not far-fetched: The resolution option is less disruptive to rendition of bank services, unlike outright liquidation or depositors’ payoff. It is also less costly to the entire macro-economy, while staff are retained in the bridge bank.

  • MfBs eye bonds issuance for fresh capital

    •Accion MfB grants N6b loans in 10 years

    Microfinance Banks (MfBs) have been urgd to consider issuing bonds  as an alternative source of raising capital needed to meet their customers’ credit needs.

    The International Finance Corporation (IFC) Vice President and Treasurer, Jingdong Hua, said MfBs have capacity to issue bonds, raise fresh capital and deepen capital market liquidity.

    He said Nigeria’s capital market has huge potentials and should be tapped into by all segments of the economy.

    Speaking atthe weekend, during a seminar to mark 10th year anniversary of Accion Microfinance Bank, held in Lagos, he said MfBs have potentials that should be tapped to grow the economy.

    In the policy framework for MfBs, the Central Bank of Nigeria (CBN) classified operators into three categories with correspondent capital requirement. They are unit MfB with N 20 million minimum capital base, State MfB with N100 million and National MfB with N2 billion capital requirements.

    The Accion Microfinance Bankoperates with National Licence.

    Accion Microfinance Bank has granted over N6 billion loans to customers in the last decade, its Chairman, Board of Directors, Patrick Akinwuntan disclosed at the event.

    He said the bank has supported large number of entrepreneurs to grow their businesses.

    He said Accion Microfinance Bank now operates in seven states with a total of 60 branches. “We want to empower micro-entrepreneurs with credit and financial services. We are focused primarily on making them happy and fulfilled. We are just starting at 10 and our focus is to deepen the financial system,” he said.

    Akinwuntan emphasised that one of the benefits of financial inclusion is helping people start and grow their businesses.

    Outgoing Managing Director/CEO of Accion Microfinance Bank, Bunmi Lawson, said the bank under her leadership has created an institution that has solid foundation. “We have built institution and staff that are committed to innovation”, she said.

    The CBN Director, Development Finance, Mudashiru Olaitan, said financial inclusion can help people step out of poverty and address long term growth  challenges.

    The CBN has overtime, emphasised the need for Nigerians to embrace savings culture to bridge the huge gap between the banked and unbanked.

  • Ahmed urges MFBs to be customer-friendly

    Kwara State Governor Abdulfatah Ahmed has urged microfinance banks in the state to render suitable and customer friendly services. He said this becomes expedient as current banking activities now demand more flexible services. He noted that his administration has ensured inclusive financial system to grow and expand businesses in the state. He said the financial help is providing existing businesses with access to capital at single digit interest rates.

    Governor Ahmed said this in Ilorin, the state capital at the commissioning of the first cooperative financial institution, KWACOFOCUS Micro Finance Bank. He said his government holds agricultural sector in high esteem owing to the potential of the sector to create employment and generate revenue through investment opportunities in the agricultural value chain.

    The governor said that the institution was set up as a source of financial services to low-income earners and micro and small enterprises operators, who find it difficult to access needed funding in certain financial institutions.

    He said the floating of the financial organisation would complement the government’s efforts in financial inclusion for rural farmers and traders.

    The governor urged members of the public, especially the youths to take advantage of the services of the bank and access funding for their businesses.

    He pledged the commitment of his administration to provide a conducive and enabling environment for banks and businesses in the state.

    Earlier, the Chairman, Board of Directors of the bank, Hajia Zururat Zubair, said the financial institution was set up to complement the effort of the government in the areas of agric development and sustainable empowerment for rural farmers, financial inclusion for rural women and youths, support for the growth and development of small scale businesses and easy accessibility to finance.

    She said that the bank would work to bridge the funding gap perceived to be an impediment in meeting the target of placing agricultural value addition into a greater level.

    She added that 80 percent of the bank’s credit facility would be set aside for agricultural cooperative societies.

    Hajia Zubair urged farmers and small scale business owners to partner with the new financial institution, saying it belongs to all Kwarans who determine to grow their businesses.

  • Expert faults CBN’s offshore software for MfBs

    The Central Bank of Nigeria (CBN) has finally concluded the selection exercise for a software for a shared platform for the more than 900 microfinance banks (MfBs) in Nigeria. The selection exercise that has gone on for the past three years will be concluded anytime soon. Funding is said to have been provided by the International Fund for Agricultural Development (IFAD) through Rural Finance Institution Building Programme (RUFIN) programme.

    Investigations showed that the CBN embarked on the exercise in order to streamline the management and regulation of the large number of MfBs in the country. It was believed that a shared service platform will reduce the cost of business for them and enhance their chances of continued survival.

    This is especially true for the very small entities. The larger ones have the resources and have already made significant investments on their own. The CBN started evaluation with more than 40 entries before finally shortlisting Inlaks Computers, Chams Plc and a consortium of MTN and CWG Plc. The CWG/MTN consortium already had a shared service for microfinance bank running as the MTN XaaS platform which was launched four years ago.

    It was gathered that Inlaks Computers had proposed to use a version of its Temenos T24 banking application for the project. This solution is a complete front to back office, customer relations management (CRM) and product lifecycle management software platform that powers the retail, corporate, wholesale, universal and private banking operations.

    Banks such as Zenith Bank unsuccessfully tried to implement T24. Findings also showed that Temenos has a similar project in Ghana with the Agricultural and Rural Bank (ARB).  ARB had commenced an exercise to replace the T24 solution in the middle of last year. Inlaks has several customers for T24 in Nigeria including the CBN, KeyStone Bank, Sterling Bank, Lapo Microfinance and a few others. T24 is regarded as one of the top tier banking applications in the world but is notoriously difficult to customise to fit the peculiarities of the customers.

    It was gathered that the CBN has selected Inlaks Computers to use its T24 system to implement the MfB shared platform. This has surprised many industry insiders, who point out that the new Director-General, National Information Technology Development Agency [NITDA], Dr Isa Ali Ibrahim has made a strong case that Federal Government’s policy required its ministries, departments and agencies (MDAs) including the CBN to adhere to the local content policy in ICT. Ibrahim has threatened to jail anyone that flouts this directive as provided by law. The policy states that MDAs should purchase foreign ICT products only when there are no local alternatives.

    Text message sent to  the CBN spokesman, Isaac Okorafor on the subject matter was not responded to as at press time.

  • CBN directs banks, MfBs, DFIs to disburse N220b agric funds

    CBN directs banks, MfBs, DFIs to disburse N220b agric funds

    • Anchor Borrowers’ Programme guidelines out 

    The Central Bank of Nigeria (CBN) yesterday appointed Deposit Money Banks (DMBs), Microfinance Banks (MfBs) and Development Finance Institutions (DFIs) to disburse N220 billion targeted at the Anchor Borrowers’ Programme (ABP).

    The apex bank also released guidelines for the implementation of ABP which it said was established in line with its developmental function.

    According to the CBN, the ABP fund shall be provided from the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF). Loan amount for each farmer shall be arrived at from the economics of production agreed with stakeholders.

    “Interest rate under the ABP shall be guided by the rate on the N220 billion MSMEDF, which is currently at nine per cent per annum (all inclusive, pre and post disbursement). The Participating Financial Institutions (PFIs) shall access at two per cent from the CBN and lend at a maximum of nine per cent per annum,” it said.

    The guidelines also said banks that fail to apply the nine per cent interest charge on the loans shall reverse the excess fees/interest charged and will be issued a warning letter to the and outright ban from participating under other CBN Interventions after two infractions.

    “The tenor of loans under the ABP shall be the gestation period of the identified commodities while repayment loans granted to the farmers shall be repaid with the harvested produce that shall be mandatorily delivered to the Anchor at designated collection center in line with the provisions of the agreement signed. The produce to be delivered must cover the loan principal and interest,” it added.

    In a circular, the CBN said the ABP, which was launched by President Muhammadu Buhari in November 2015 was intended to create a linkage between anchor companies involved in the processing and small holder farmers (SHFs) of the required key agricultural commodities.

    It said the programme thrust of tABP was the provision of farm inputs in kind and cash (for farm labour) to small holder farmers to boost production of these commodities, stabilize inputs supply to agro processors and address the country’s negative balance of payments on food.

    It said at harvest, the SHF supply his/her produce to the Agro-processor- the Anchor who pays the cash equivalent to the farmer’s account.

    The ABP, the CBN added, evolved from the consultations with stakeholders comprising Federal Ministry of Agriculture & Rural Development, state governors, millers of agricultural produce, and smallholder farmers to boost agricultural production and non-oil exports in the face of unpredictable crude oil prices and its resultant effect on the revenue profile of Nigeria.

    “The broad objective of the ABP is to create economic linkage between smallholder farmers and reputable large-scale processors with a view to increasing agricultural output and significantly improving capacity utilisation of processors.

    “Other objectives include:  Increase banks’ financing to the agricultural sector. It was also meant to reduce agricultural commodity importation and conserve external reserves  Increase capacity utilisation of agricultural firms and create new generation of farmers/entrepreneurs,” the CBN said.

  • MFBs on brink of mass failure

    MFBs on brink of mass failure

    With over 70 percent of the existing microfinance banks on the brink of collapse due to the growing economic recession, experts have suggested survival strategies for the MFBs to stay afloat, reports Ibrahim Apekhade Yusuf

    Virtually every sector is feeling the bitter pill of the growing economic recession and the microfinance banks, which form a subset of the banking and financial institutions are sadly not immune to the biting economic crunch.

    The Nation can authoritatively report that most operators have been constrained considering the dire straits confronting the sector in recent times, as many businesses are negatively affected.

    A damning report

    Over 70 per cent of the existing 406 licenced MFBs in the country are now exposed to high risk margin in 2016 more than was the case in 2015.

    According to the latest Central Bank of Nigeria (CBN) findings on the sub-sector published on its website, a cursory view of previous years’ performance when compared to this year, showed that MFBs suffered higher risk, poor patronage and low return in investment in 2016.

    It classified the categories of the exposure of the banks into various risks, based on findings of 2013 through 2015, with emphasis on 2016 third quarter returns.

    As at 2015 performance, microfinance banks recorded above average in terms of risk ratings, but fell below the mark at the end of third quarter of 2016.

    Whereas the MFBs paid-up capital increased by 54.40 per cent to N84.18 billion at the end of 2015, representing a surge of 54.40 per cent from N54.52 billion recorded in 2014 the 2016 quarterly review indicated a loss of 1.5 per cent so far.

    At the end of third quarter in 2015, the shareholders’ funds decreased by 1.51 per cent to rest at N95.36 billion from N97.03 billion.

    Expectedly, managers of the various microfinance banks in the country have complained of neglect by the authorities.

    Tales of woes

    Mr. Austin Irene, chief executive officer of Devine Microfinance didn’t mince words when he said: “There is yet to be enough attention paid to this sub-sector, by way of government assistance, unlike in the conventional banks.

    “For the commercial banks and other sectors, there is AMCON that absolves bad debts from their system. But there is none for the microfinance banks, meaning that if any of us is in a similar situation that the conventional banks find themselves, we are to bear the brunt alone.”

    Other operators stated that the present economic downturn has taken away the medium and small business enterprises that form the bulk of their clientele, with many of the benefits of loans taken from the sub-sector by not servicing them.

    Speaking at the second edition of the Nigerian Microfinance Platform in Abuja, Chairman, Board of Directors, NPF Microfinance Bank Plc, Mr. Joel Udah, stated that the worrisome state of economic growth and high level of poverty is one of the challenges hindering financial inclusion which is a major platform of microfinance banks.

    Also speaking, Mrs. Nwanna Joel-Ezeugo, Chief Risk Control and Compliance Officer, Accion Microfinance Bank, said due to the tough operating economic conditions and foreign exchange policy of the government, businesses are finding it very difficult to cope.

    “The real people in the market are actually finding it very difficult to cope because there are so many inconsistent government policies that are not enabling them to actually run their businesses the way they used to. Of course, if they are having issues, automatically, it would affect their ability to operate effectively with microfinance banks.

    “The foreign exchange policy is a major issue. The reason being that in the middle of last year, the CBN came up with a list of activities that can be accessed through the official exchange rate. And we know Nigeria has so far been an import dependent economy. When that policy came up, a lot of people were taken away from their jobs and businesses.

    “And of course, even the increase in the exchange rate, those that can access official rate, the funds are not available at the CBN, because of the drop in the price of oil and declining reserves. At the end of the day, you find out that either way, the economy is not favourable to the people in the market.”

    She called on the federal government to churn out concrete economic blueprint that would help point out the direction of the country’s economy, stating that “If everyone knows the direction we are heading, we will begin to strategise on how to get there. But where there is no clear cut policy, these inconsistencies will kill more businesses and throw a lot of people out of jobs.”

    RUFIN to the rescue

    Thankfully, the Rural Finance Institution Building Programme (RUFIN) in partnership with the International Fund for Agricultural Development (IFAD) and the Federal Government of Nigeria, have been able to develop and strengthen microfinance banks (MFBs), other member-based microfinance institutions (MFls), by enhancing the access of the rural populace to the services of these institutions in order to expand and improve agricultural productivity and Micro-Small Rural Enterprises.

    The programme is being implemented along with four participating institutions namely; the Central Bank of Nigeria (CBN), the National Poverty Eradication Programme (NAPEP), Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) and the Federal Department of Cooperatives (FDC). Besides, the initiative is being supported by a Loan Agreement of US$27.2 million.

    Shedding light on the foregoing, the Deputy National Programme Manager, RUFIN, Mrs. Unekwu Ufaruna while speaking with The Nation recently on the success stories recorded with RUFIN observed that the initiative has since developed a training manual for capacity building of MFBs and financial NGOs.

    Specifically, she said: “So far 33MFBs, 10 Financial NGOs selected from the outcome of Risk Institutional Assessment of NDIC/CBN and the over 4,000 Community Based Credit and Savings Organisations in the past one and half years have been subjected to vigorous capacity building and provision of necessary hardware and software ICT equipment. In line with the identified gaps from the Risk/Institutional Assessment for MFBs, Financial NGOs and Financial Cooperatives, a tailor made curriculum was designed, to ensure their capacitation. Office equipment such as desktop computers and hardware were distributed to 32 participating MFBs.”

    Besides, she said, as part of the capacity building of MFls, MFBs and RMFls, which is one of the core mandates of the programme, RUFIN trained 27 MFBs (MDs/Credit Officers) on product development. This has resulted in improved financial products piloted by MFBs and increased deposit mobilisation. Also, 33 MFBs have been trained on Risk Management while 1,524 staff of RMFls were trained on gender learning and action system, making microfinance work, enterprise management and governance and entrepreneurial skill development respectively.

    In order to enhance client outreach through establishing linkages between RMFls and formal banks, 3,516 Rural Microfinance Institutions have been linked with formal banks. A total of N66,598,865.88 of voluntary savings have been mobilised from 31,149 savers in the 12 participating states. Out of these 44.68% of these savers were women, while 55.32% were men. A further analysis showed that 20.69% were youths while 0.91 % are physically challenged.

    The programme has formed and strengthened 6,295 village credit and savings groups consisting of 149,990 members in the 12 participating states. In addition, 529 RMFls with 1413 members were trained on gender learning and action system, making microfinance work and governance etc in 11 states consisting of 875 men and 38 women.

    Speaking with The Nation recently, Mallam Adamu Ibrahim, a microfinance expert with RUFIN, said most RUFIN-mentored MFBs have benefitted immensely from capacity building training among other expert advice which has helped to improve their bottom-line ultimately.

    At the risk of sounding immodest, he said: “Many MFBs have benefited from RUFIN’s capacity building programme thus far and have been able to boost their portfolio investment within this period because they are now better equipped with the right skills set.”

    Echoing similar sentiments, Mr. Godbless Afor, the Executive Secretary of the Association of Non-Bank Micro Finance Institutions of Nigeria (AMFIN), said RUFIN had provided training and capacity building programmes, logistics and technical support to the association.

     

  • ‘MFBs must be innovative to succeed hard times’

    ‘MFBs must be innovative to succeed hard times’

    Mrs. Bimpe Ogunleye is the pioneer Managing Director/CEO, Bowen Microfinance Bank Limited. In this interview with Ibrahim Apekhade Yusuf she speaks on the innovative measures being adopted by the management to move the bank forward

    Foray in business

    We set up shop in September, 2011 as a unit microfinance bank but we’re already putting measures to become a statewide microfinance bank. Actually we started off as a state microfinance bank in terms of our capital base. But we should be getting our license as a state microfinance bank in due course.

    We’ve 22 staff made up of both marketers, but the beautiful of it is that our core function is to drive deposit so everyone of us has a mixed ability to work anywhere within the system.

    Our total customer strength is about 10,000 because we’ve both borrowers and non borrowers. There are many of our customers that are just running their savings account, running their current account with us besides micro borrowers or the macro or the SMEs as well.

    Loan portfolio

    We’re giving loans and people are paying back so it keeps fluctuating. And given the peculiarity of the economic situation in Nigeria, this year particularly, we’re close to N300million as at the end of July. This is just this year alone.

    You know our proprietor, which is the Nigerian Baptist Convention and our board, are indeed very passionate about ensuring that Bowen MFB fulfills the purpose and the reasons for which it was set up, which is to empower, to nurture, to harness opportunities for the rural poor aside every other thing.

    Cutting edge

    Basically, we’ve two markets. We’ve the primary market and the secondary market. Our primary market is everybody while our secondary market is the members of the denomination. So forums where we’ve people gather together, we go there and then people around that community we also extend the financial services that we’ve to them. And then we’ve collaboration with some cooperative bodies and they’re linking us up with a lot of cooperative societies all over and most of them wherever they are, they’ve tentacles everywhere. So that has also helped us to linking up with people and linking up with groups and that has formed a base for what we call our strategic plan. And physically, we’re not there yet but technology-wise we’re there because our pioneer correspondent bank, which is Fidelity Bank, gave us that opportunity to run a platform where our customers, wherever they are can access their accounts anywhere as long as there’s Fidelity Bank.

    We nurture our customers, we train them and we do all the necessary interviews. Then of course, you know the CBN is promoting beyond brick and mortar approach to banking. That is why they’re promoting agency banking, online banking and all that. We’re deploying all these components for the benefits of our customers.

    Futuristic plans

    We’re already working on our national banking license as well and because of the way we’ve driven our business with good technology, it has created virtual branches. Wherever our clients are, through our technology in Lagos we can service them. So we’ve already created customer traffic everywhere and we’ll continue to do that whilst we work towards getting our banking license so that we can actually service everybody in Nigeria.