It would be nice to know how many microfinance institutions in Nigeria carried out a Country Context Analysis of the business prior to opening for clients. Well, before we are drifted away by the sound of the term, let’s state clearly that Country Context Analysis simply refers to an approach and method for bringing into proper perspective and understanding the milieu within which an intervention, such as a poverty alleviation programme, may be effectively situated in a polity.
Country Context Analysis is not the same thing as environmental scan, which may focus on the macroeconomic fundamentals often to the exclusion of the political-social underpinnings of the environment.Context Analysis, whether of the Strength, Weaknesses, Opportunities and Threats (SWOT) variety or the sociological analysis variety, aims to analyse the milieu or environment within which a programme is to be planted. It is a vital prelude to the creation of a strategic plan of action for a proposed business. Now, one may ask what the essence of this analysis is when many businesses have taken off and succeeded even without a feasibility report.
While such a question would benefit from a cursory look at the objectives of a contextual analysis, I hasten to say that in a primordial society, based on the culture of patronage, nepotism and near mass hysteria over wealth acquisition, anything can happen. Anybody can succeed but economic success in such places is not evidence of hard work or genuine superior intellect. Certain types of success do not leave observers with much positive learning points for future economic management..
The general political and economic conditions of a society impact the implementation of any kind of intervention, including microfinancing. This impact is felt at almost all stages of the life of any intervention programme – at the beginning, midway through implementation and all the way down. The conduct of government in terms of policies, the politics – economic and social, the level of development of the financial markets, and the culture and beliefs of the people are all vital links in the chain of success of a microfinance initiative. All operators need more than a passing knowledge of the environment, much as they may not need to graduate in strategy and tactics of economic management.
Fortunately, a proper contextual analysis helps us to better understand the project we are proposing to execute, be it a corporation to deliver a particular service or a general programme with wider ramifications, or even a special intervention project to deal with a specific problem. It ensures that a project addresses the right issues surrounding the subject that gave rise to it. Addressing the right issues is critical if we are to make the best possible strategic choices with regard to the objective of any project and also in order to adapt the programme or project to any new and emerging issues over the life of the project.
Our current approach to microfinancing has gone astray. That is why many are at sea with neither the capacity to creatively manage fresh life into their decadent loan books nor the skills to generate fresh high quality risk asset portfolios. This is largely because they do not know the right issues in microfinancing; and once you don’t know the issues you cannot be expected to stay on them. Nor are you capable of making needed adjustments to refocus your entity at times of change like we have now in Nigeria.
Microfinance institutions are corporate entities created to focus and address a specific problem – provision of financial services to the poorest active members of the society. While the temptation to assume that we know the poor and their location is very high, a contextual or situation analysis will put specifics to our understanding of the animal we pursue. If we know where to find the active poor, we also need to know their numbers and the activity they engage in mostly. Above all, we should know how their needs evolve over time. This kind of information may not emanate from the efforts of individual players but may easily be a product of a group of stakeholder and provided by those they trust could avail them with it. Flying blindfolded is no longer a thing to be proud of.
Furthermore, addressing the right issues is one thing but staying on the issues is another. Part of the problem many microfinance institutions in the country face is their inability to stay on the issue. Today, we are aware that many have acquired obscene volumes of nonperforming loans. The question that is not answered is how much of such nonperforming loans were actually made to the active poor. Many operators have removed their eyes from the ball – the provision of financial services to the very poor active members of our society. This shifting of gaze can be substantially traced to the absence not only of a source document that compels a return to the right issues and adaptability to change but also a lack of effective business model.
Now, more than ever before, the need has arisen for microfinance institutions to rise to the challenge of financing the poor. The current economic and financial crises in the country are deeper than we seem to know. The middle class or what was left of it has been ravaged by the recent events in the oil sector that they can no longer meet the needs of those that hitherto depended on them.
The extended family system is one of the major fibres of this economy that has kept it going. When governments fail, as they have at many levels, to pay pensioners their stipend, it is the extended family system that comes to their help. When parents get booted out of jobs as is currently happening in some states of the South-East, their children drop out of school. They only go back when family members lend a helping hand. The current state of affairs calls for an increase in the intervention of all concerned. We have never had a greater need for intervention that we do now.
Microfinance institutions should perhaps use this period of virtual confusion to get a deeper picture of the task they have to face. By the time this government finally gets its bearing, having undoubtedly been jolted off its trajectory by an unexpected contraction of national revenues, the casualties would have mounted. And the victims this time will extend beyond the very poor to include the not-so-poor, the perennially unemployed and some former rich people. So, microfinance institutions may do well to appraise the enormity of the impending increase in their clientele. This will drive their strategy, elicit new thinking and enable them to deploy resources more efficiently and effectively.
Emeka Osuji
