Existing Microfinance bank operators in the country on Monday pushed back on the plan by the Central Bank of Nigeria (CBN) and the bankers committee to set up a National Microfinance Bank across the 774 local government areas leveraging the Nigerian Postal Service or NIPOST.
Godwin Emefiele, governor of CBN said on Saturday that the National MFB will operate with N5 billion capital base funded through the Agri-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS).
The move is part of efforts to enhance access to finance by Small and Medium Enterprises (SMEs), create jobs and promote financial inclusion. Reacting to the development, Rogers Nwoke, president of the National Association of Microfinance Banks (NAMB) who spoke with BusinessDay yesterday by phone said the development will affect the industry negatively. “The wisdom of the CBN in coming up with this, is what I don’t understand. Several things are wrong with this. Is the CBN now an operator? I don’t understand,” Nwoke said by phone. He said the CBN should help the moribund NIPOST to deliver on its mandate before giving it additional service. He sees the fund going to be passed through the NIPOST to small businesses as going down the drain. “It is totally unacceptable and we hope they do not implement it because it does not make any sense at all.”
READ ALSO: MFBs lose N42bn uncollected loans to COVID-19 lockdown(Opens
Nwoke added that if the CBN wants to enhance access to credit, it should rather than licencing NIPOST, fund the existing microfinance banks to achieve this. The CBN governor had on Sunday raised concern that the microfinance banks operating in the country are not lending at single digit interest rate. Nwoke said the reason why microfinance banks loans are expensive is due to the high cost of fund. The latest update of licenced microfinance banks operating in the country, obtained from the CBN, show that there are 1,028 microfinance banks as at May 31, 2018 out of which about eight are in the National licence category. Ayodeji Ebo, managing director, Afrinvest Securities limited, said, this initiative will crowd out the private sector in the micro-finance Industry. He added that the move will not necessarily improve lending to the real sector. “The funds advanced would be perceived as a social intervention fund which will not be repaid. I’m surprised the CBN is going this route to solve lending problem in Nigeria. As long as the structural issues like ease of doing business, infrastructure and power challenges are not resolved, businesses will remain challenged, and as such unprofitable and unable to repay back their loans” Ebo said in an emailed response to BusinessDay questions. Another operator based in Lagos, who spoke with BusinessDay on Monday under anonymity said, “let us wait and see.”
The recent move by the CBN is akin to a blast from the past. The Federal Government in 1998 established the Peoples Bank of Nigeria with an initial allocation of N30million to meet the credit needs of small borrowers who cannot satisfy the stringent collateral requirements demanded by conventional commercial banks. The Federal Government abolished the bank but in 2014 the Federal High Court ordered FG to re-establish the bank.
