Micro finance banks: Bracing up to challenges
By Sulaimon Adesina
ONE interesting gap exists in the pre and
post independence history of most developing nations. The standard of living of citizens was more favourable before the societies concerned got colonised by the then world powers. Central administrations were absent but the people were organised in small communities, groups and villages. As trade by banter was prevalent, small but productive activities thrived to put the small groups on sound economic footings.
With official declaration of independence came changes in structures and institutions of these nations. The public sector became a glaring employer of labour.
Several years post independence, many of the developing economies are coming to terms with the undisputable place of small businesses as the blood of their nations.
The economy of many countries are now dictated by the small and micro entrepreneurs. The United Nations Development Programme, (UNDP), says about 90 per cent of the world’s business fall within the small and medium category and collectively employ about 60 percent of the global work force.
Myriads of problems, sadly, have, prevented the developing economies from having the direct touch of the micro organisations. Financing, most evident of the hindrances have therefore received wide attention of stakeholders in the last few years. The World Bank Group instituted the micro credit summit and has committed over $200 million in concessional loans and investments to enable conference institutions build their portfolios and extend outreach to the poor. By far the most plausible efforts in this direction, globally, has been the expansion of the institution of micro-financing. Micro finance banks had and are playing significant roles in boosting activities of small and medium establishments in a way that raise high hopes for the survival of the sector. The directive of the Central Bank of Nigeria (CBN), to the erstwhile community banks in the country to transform into micro finance banks and the subsequent issuance of regulatory and monitoring guidelines on such have received wide applause by stakeholders as concrete moves to charting a prosperous future for small businesses in Nigeria.
Laolu Idowu-Agida, who pilots affairs at Classic, a newly transformed microfinance bank observes that micro dominate the country, observes that micro entrepreneurs dominate the Nigerian population.
Comparing evnts at the global front, Idowu-Agida’s conviction is that genuine empowerment of the small entrepreneurs cannot be delayed. He says, “the institution of separate organs to channel funds for small entrepreneurship development will help such businesses play meaningful part in the economic growth of the nation as it is the case in Bangladesh, Pakistan, China, Singapor and even Kenya”.
But beyond that, Idowu-Agida says microfinancing is bound to witness tremendous lift going by the contents of the regulatory guidelines of the CBN. Mary Obe, another stakeholder in the Nigerian micro finance sector, argues that the CBN’s directive and the consequent adjustment in the sector could not have come at a better time.
“The government and the international community realised that the community banks could not reach the low income group because of problems ranging from lack of funds and little expertise to incompetent human resources.”
The transformation, Obe stressed, would place the micro finance banks in a positions to widen capital base and their ability to employ professionals, acquire equipments and ultimately reach the targeted poor will be strengthened.
No doubt, the efforts of the CBN have set the right path to success for the MFBs, but the challenges lie for the finance institutions to meet the expectations on them. B. O. Oyebolu, another stakeholder opines that everythingrevolves round the genuine intent of investors. “Micro finance investors have to take the job as a call to serving humanity, a call to development of the people. We have to know that if we develop our people, we will have a better place to live and proud to be Nigerians. Investors will have to show concern for the betterment of economic and social lives of the small investors’, he says.
Genuiness of investors will be reflected in their strict compliance will the regulatory guidelines of the CBN. The apex banking body ‘ regulation mandates all MFBs to provide detailed information on its credit clients to the Credit Reference Bureau on a timely basis. It has also drawn up relevant regulations on ownership, funding, mode of operation and controls, among others as part of efforts to protect the interest of stakeholders. Th history of failed banks in the country has left tale of woes in the mouth of people whose interest have been jeopardised from fraudulent activities of bankers. Nigerians will not want the micro finance banks to toe the save line.ves of people the investors”, he says.
Oyebola, who heads the Six Covenant Micro Finance Bank, identifies passion as a great factor of success for the micro finance banks. The same point is corroborated by Obe, who charges investors to understand their main focus and be sure of how to achieve them. Obe reflects on the situation in her own establishment, “In Solid Rock Micro finance Bank (where she calls the shot), we have discovered that the business of microfinancing goes beyond the official intricacies. We have realised that we must come down to their level, study their language, and understand the dynamics of the business itself. That is the kind of approach investors will have to adopt.”The desire of the MFBs to take banking to the SMEs however plausible becomes non impacting if the genuine intent of the investors are questionable, she says.
For the stakeholders ( investors, small scale entrepreneurs and regulatory authorities), their desire to allow the present initiatives materialise will help to grow the sector. That is what Idowu-Agidaterms the patience factor. He believes that the CBN’s microfinance policy will take time to materialise. A project that will have practical implications on a gradual basis.
The MFBs still have to confront the challenge of making real impacts on the target beneficiaries. Despite the magnitude of Mohammad Yusuf’s campaign and the involvement of his pet project, the Grameen Bank in getting loans to the poor over several years, studies reveal that the standard of living of people in Bangladesh is not one to be cheered about yet. Many are yet to come to terms with the poor practical showings of the universal banks in Nigeria subsequent industry turnaround in mergers and consolidations
The MFBs will also do well to tackle the efficiency challenge in workers. Training and retraining of staff must take prime place in their operatios if the long term goals are to be realised. They will have to brace up and meet the global challenges in customer relations, human resources development. Muhammad Yunus, in his recent book, Creating a World Without Poverty: Social Business and the Future of Capitalism,depicts the practical way to everyone’s dream, a life devoid of poverty. The new micofinance banks in the country now have the ample chance to raise the economic status of Nigerians, they must grab it with both hands.
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