Microfinance in Nigeria – part two
Microfinance institutions in Nigeria have been accused of neglecting the people they were set up to help: the country’s impoverished majority. Hughes Nneike investigates
One of the problems bedevilling Nigeria’s microfinance institutions, according to Dr Godwin Nwabunka, CEO of microfinance institution the Grooming People for Better Livelihood Centre, is the result of the sudden transformation of the old community banks into microfinance banks. He alleges that this happened without providing the infrastructure, or human and material resources necessary, for the operators to have a good grasp of the requirements of microfinance.
To Nwabunka, most of the existing microfinance operators’ exposure in commercial and investment banking is at total variance to microfinancing, hence their inability to meet the required targets and expectations. Nwabunka adds that poor human capital and a deep lack of understanding of the needs of disadvantaged Nigerians and their eventual insolvency probably explains why the CBN had to withdraw the operating license of 224 microfinance banks in 2010.
Although CBN has since re-issued 121 licenses, it left a far-reaching effect on the confidence and trust of the poor people who have lost their hard earned income to these moribund banks. The crisis of confidence and dwindling trust in the CBN’s ability to provide leadership for the sector has also generated a lot of concerns on the efficacy of microfinance institutions in alleviating the huge problem of national poverty.
Nwabunka argues that in spite of the numbers of licensed operating MFBs and MFIs in Nigeria, the major issue concerning the institutions is about where these banks are located vis à vis where the poor reside. He notes that the majority of them are located in cities and big towns, whereas available data from the National Bureau of Statistics clearly shows that the poor people of Nigeria live in rural areas.