Microfinance in Nigeria: Alleviating or Elevating Poverty …

During my induction training with an international Microfinance Bank in the eastern part of Nigeria, it is a tradition to recite the mission and vision of the Bank before every training session. The idea is to help us memorize the mission and vision through repetitive recitation.

An important phrase of the mission is: “To alleviate poverty”, 

Trainees often use elevate instead of alleviate, funny right?

While it is an apparent innocent semantics mistake, yet it always got me thinking: Are microfinance banks Alleviating or Elevating poverty? 

 We really need to ask ourselves this sensitive question.

Is your MFI Alleviating poverty or Elevating poverty ?

The World Bank defines poverty in absolute terms. The bank defines extreme poverty as living on less than US$1.90 per day> (PPP), and moderate poverty as less than $3.10 a day.

The answer to this is relative , but there is way to measure the impact of an MFI on her customers.

“Microfinance should be a tool to make the have not have some, not otherwise”- Ameen Ajibola

” Whether you are an investor or an employee, if your sole motivation is making money. Microfinance is not for you” – Ameen Ajibola

Microfinance is not business as usual, while the major intent of most investor is to make money, microfinance investment is different.

There must be a desire to create social change along with the profit.

Back to the big question?

Are MFI’s Alleviating or Elevating poverty ?

There is no straight answer to this, there are some factors to be considered to provide an objective answer to this, some of them are listed below:

 

1. Effect of the services on the level of income of the customers 

Do you think the financial services (Loans, savings,account etc) rendered by MFIs increase or decrease their level of income ?

Are customers opening new points of sales or closing down their businesses? 

When customers come for a repeat loans, what changes do you observe?

Has their business improved or deteriorated? 

While the story might be different for every client, but how many percentage is affected positively? 

We need to be sincere about our answers.

While the story might be different for every client, but how many percentage is affected positively?

 

2. The effect on their standard of living 

Do we see a significant improvement in the standard of living of the customers we are serving? 

Are we helping them to build asset(houses, automobiles, etc)?

Are they able to send their wards to school? 

My years of experience as a loan officer, I have seen customers gradually lose their payment capacity gradually, and I have also seen customers gradually improving their level of income and standard of living: opening new businesses, buying cars and building houses.

And I have also seen many clients struggling to keep their heads above the water.

I might not have the accurate statistics, but there is one thing I know for sure, there is an urgent need to re-evaluate the impact of Microfinance on the clients.

We need to ask ourselves, Are we helping the customers or “killing” them? 

Are we in the business to make the rich richer or to make the poor less poorer? 

How do people see Microfinance Banks in Nigeria? Do they see them as people who build businesses or destroy them?

Are Nigerian MFI’s just known for giving only loans? What other efforts do we make towards alleviating poverty?

It is a time to reflect and take action. 

 

Read more: Paradox-of-financial-inclusion