The Nation Newspaper

Tag: Microfinance

  • CBN to release microfinance development strategy in Q2

    CBN to release microfinance development strategy in Q2

    The Central Bank of Nigeria (CBN) will release the NationalMicrofinance Development Strategy in the second quarter of the year.

    The document is expected to outline modalities for devel-oping the subsector and rules for operators to improve their performances.

    The CBN is also consolidating its achievements in the development of microfinance banks (MfBs). It has strengthened the regulatory framework and other guidelines. These include the formation of the National Microfinance Development Strategy with the United Nations Development Programme (UNDP) and the recent signing of a major agreement with the Alliance for Green Revolution in Africa (AGRA).

    Besides, the CBN is considering the establishment of a Microfinance Development Fund (MDF) to deepen the financial market. The MDF would assist in addressing the challenges of underfunding for microfinance institutions.

    It will also complement past and current efforts aimed at strengthening the sub-sector, improve financial inclusion and improve the Gross Domestic Product (GDP) rate significantly, the statement indicated.

    Many of the MfBs liquidated by the Nigeria Deposit Insurance Corporation (NDIC) ran into trouble when their debtors refused to pay back their loans, over 80 per cent of which were unsecured. Besides, some of them took excessive risks, branching out too quickly swithout considering resources at their disposal and whether utilised funds were short or long term obligations.

    A unit of MfB is authorised to operate in one location without branches/cash centres and is required to have a minimum paid up capital of N20 million; and state, of N100 million.

    It is equally allowed to open branches within the same state or the Federal Capital Territory (FCT). But the national MfB is authorised to operate in more than one state, including the FCT. It is required to have a minimum paid up capital of N2 billion and is allowed to open branches in all states and the FCT, although subject to prior written approval by the CBN.

     

  • ‘Microfinance underfunding agric’

    ‘Microfinance underfunding agric’

    Securing financial services for agriculture has continued to be a challenge , a consultant to the World Bank, Prof.Abel Babalola Ogunwale, has said.

    Speaking with The Nation, Ogunwale, a lecturer in Agricultural Extension and Rural Development, Faculty of Agricultural Sciences, LadokeAkintola University of Technology, Ogbomoso, said the credit paradigm have failed because local farmers don’t receive credit from microfinance institutions.

    He said microfinance institutions (MFIs) have failed in providing sustainable microfinance services that contribute to resolving the agriculture credit problem by serving some of the rural poor.

    He said MFIs were created to serve poor farmers, but most have focused on urban and semi-urban clients in rural areas with high population densities.

    He said MFIs have limited their operations to areas with high population densities and farm loans usually represent a small share of their loan portfolios.

    Ogunwale urged the MFIs to provide credit to farmer associations if there is fear of default, adding that the associations will collectively guarantee one another’s repayment.

    He urged the government to assist in overcoming barriers to agricultural microcredit. Effectivedemand for credit by small farmers is limited by high transaction costs, risk aversion, and lack ofinformation and education, he added.

    President of the Lagos Apex Fadama Community Association, Abiodun Oyenekan, said microfinance institutions have not bben doing enough to finance small-scale agriculture.

    Many farmers need credit to purchase seeds and other input, as well as to harvest, process, market and transport their crops.

    According to him, the failure of microfinance to provide finance to farmers, has led to dearth of agricultural credit.

    The absence of rural banks or their unwillingness to meet credit needs of rural farmers largely account for the influence of informal lending institutions on agricultural production in the rural areas.

    He noted that here is little evidence that micro-finance has radically transformed the livelihoods of farmers.

    Meanwhile,watchers see this year as very promising to farmers as the N600 billion Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) fund is expected to boost their agricultural produce.Furtherance to measures put in place to enhance financial inclusion in the country, the Central Banks of Nigeria (CBN) has set aside N600 billion for onward lending to smallholders farmers.

    Microfinance banks (MFBs), being a sub-sector that is close to the primary producers, processors and distributors of agricultural products, are recognised to participate in the distribution of the funds.

    In view of this, the National Association of Microfinance Banks (NAMB) South West zone has approved six cooperative societies to benefit from the agricultural fund of the Federal Government.

    The approved cooperative societies include Livestock Farmers Association, Tractor-Hiring Farmers Cooperative, Fish Farmers Cooperative, Agro-input Farmers Cooperative, Agro-processing Farmers Cooperative, and Cash Crops FarmersCooperative.chairman, NAMB, South West, OlufemiBabajide, said the six cooperative societies were carefully choosing, taking into consideration the role each of them could perform in agricultural and food production, stressing that NAMB was working with the aforementioned societies under the Support Farmers Initiative of the Federal Government.

    “The approved cooperative societies convince the association that they will be helpful in the disbursement of the fund,” he said, as the association has highlighted modality to disburse the fund, adding that the process of pairing them with MFBs has begun, and that by January, each of them will know which MFB it can go to access it. According to Babajide, the fund is meant to assist farmers to increase food production, as well as provide more jobs and grow the economy.