Managing Fraud in Microfinance Banks: Reason behind the menace

Managing fraud in microfinance banks
Managing fraud in microfinance banks

Managing fraud in microfinance banks: Reason behind the menace

You can imagine walking into your microfinance bank to make withdrawal only to be told you need to hold on. “Please just a minute, we need to check something in your account”. Does that sentence sounds familiar? These are the words you receive from the bank teller who is as confused as you are, as to why you intend making withdrawal when there is insufficient funds in your account when you claim to have so much.

The above incidence occurred when a customer walked into a microfinance bank (name withheld). The intention is to make withdrawal, but discovered that his account officer never remitted the cash to the teller to credit his account. This is fraud but the management ended up covering up the staff while they made provision to pay the customer pending how they solved the issue.

Fraud will always continue to thrive in such environment if stiff penalties are not melted out to deserving staff.


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Elizabeth Adegbesan wrote that “FINANCIAL sector experts have blamed the rising incidences of insider-related fraud cases in banks on poverty and weak internal control measures in banks.” Vanguard


Looking at stories from various newspapers, it is clear that there are so many internal control lapses in microfinance operations that it becomes difficult to control fraud perpetuated by unsuspecting staff. While some attribute it to the low salary received by the staff. It is not justifiable stealing from an employer or customers. Stealing from an employer contravenes Section 287 (7) of the Criminal Law of Lagos State, 2015 (Revised), and is punishable with seven years’ imprisonment.


Solution to Increasing Fraud

The increasing rate of fraud in microfinance banks is becoming unbearable that customer are becoming sceptic about continued transactions with the banks.

Fraud comes in many forms and professional advice would require microfinance bank to manage risk which thereby prevent fraud.

Managing fraud in microfinance banks would see a transparent system that requires every member to be subject to laid down policies.

Fraud is committed by top management and junior staff. The fear of being penalized for committing fraud would not necessarily stop a staff from involving in fraud.

If microfinance banks intend to reduce fraud, they must invest massively in the internal control system and its personnel to ensure accountability.

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