Sustaining microfinancing in Nigeria

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MICROFINANCING has contributed immensely to small and medium-scale businesses in both rural and urban areas in the country.

This is by empowering the economically active people and bringing about growth and development of individuals through soft and accessible loans. It is the hope of the common people for self sustenance and development.

Should the hope of the common people be dashed, then what happens? Laws are made for all people to guide, ensure compliance, correct and punish, ultimately for the betterment of society.

Regarding microfinance institutions, if governments at all levels are not proactive and sensitive about sustaining the industry, the hope of the common people could be dashed due to high delinquency rate.

It is high time governments at all levels collaborated with microfinance banks, showing that loans are not government largesse.

This is because most borrowers have the mindset that loans disbursed by or through microfinance banks are their share of the so-called national cake.

This underlines the bad lessons that selfish politicians have instilled in people’s minds. This has adversely affected microfinancing.

Even government is not excluded because the larger percentage of loans given to all states for small and medium entrepreneurs and disbursed through microfinance banks are yet to be fully recovered. The microfinance banks are at the receiving end.

The greatest impediment is weak legislation to enforce loan repayment. Oftentimes, borrowers obtain loans, then set aside part of it to fight the lenders.

Being aware of the weak legislation, they buy time in the court of law, bringing the bank into disrepute. This results in making loan conditions hard, denying genuine borrowers; forcing loan officers and managers out of job, and causing early retirement or resignation, as in my case.

Government should review, adjust and modify loan legislation in such a way that default is seen as fraud punishable under the law.

It could create a unit under the Economic and Financial Crimes Commission (EFCC), or other agencies with the sole aim of curbing the cankerworm.The police lack authority to arrest loans defaulters, and many people exploit the situation.

The Central Bank of Nigeria should do more to assist microfinance banks. It should not be obsessed with protecting clients’ deposits. The banks too need even greater protection in order to achieve its objective of repositioning the economy.

Lastly, government should ensure that loans meant for SMEs are disbursed through the Central Bank to beneficiaries through registered and recognised microfinance banks.

This will reduce the default rate and ensure that only genuine beneficiaries enlist. The illicit demands by some government officials, which is the bedrock of default, will thus be truncated.