Paradigm Shift In Micro-Financing

There are so many good things about microfinance and micro-enterprise on the overall effect of business operations of micro, small and medium enterprises of ordinary citizenry such that it has gained significant momentum to shape the global landscape and live of people dwelling in developing countries.

It is a fact that microfinance has come to stay in Nigeria and other developing nations. What we only need to do is to maintain a healthy micro economic environment which sets standards for operation of the sub sector.

While the above is what is expected of a functional microfinance environment, recent events are not portraying the desired results about the level of non-performing loans that are going bad. All due to some careless policies and decision taken by stakeholders in the microfinance industry.

Looking at some of the recent issues we have in the Nigeria Microfinance industry we recap that;

• The Asset Management Company of Nigeria (AMCON) recently in October 2018 released list of top debtors owing N906bn and due to several publication which is supposed to serve as deterrent to the debtors. Nothing so far has been done to compel these individual in committing to repayment. My point is, if it is difficult retrieving loans from these set of individuals who supposedly have some form of collateral for their loans how do you expect to recover unsecured loans from micro-client whose business are usually unsustainable.
• We need to stop staff migration from one MFB to the other all in the name of pouching best staff. Staff are free to move when necessary, but we need to understand that microfinance operation is volatile and nothing suffers more than the MFBs loan portfolio created by a loan officer, transferred to another officer who gives limited attention to the transferred loans due to his own target.
• Giving multiple loans to customer even when they declare they are on loan with other MFB(s) will do more to impoverish these customers we seem to help out of financial difficulty. Granting multiple loans to clients from different MFB does not in any way help them survive, but rather kills them slowly. Some MFBs want to replicate AMCON by buying off some or all of these clients loan all in a bit to grow their portfolio, what they forgot is that customer moving from one MFB to the other has some Red Flag traits which is not so good for the industry.
• MFBs are mandated to register with at least two Credit bureaus in Nigeria but till date, you won’t in any way fine some MFB on the platform. And if they eventually subscribe to a credit bureau, the refuse to comply with the credit reporting act 2017. The thing is, adequate information is needed to make concise decision about prospective client loan position, and if the necessary information cannot be assessed. It becomes problem for all the MFBs who will take the pain to recover their money from the same client most especially when they have these information and they refuse to render such to their registered credit bureau company.
• Faulty credit reference system is another issue that needs to be address. Registering for at least two credit reference systems is not the solution. The system needs to be assimilated to a single information retrieving platform while the concern credit bureau companies still enjoys the monotony of their information, it should come in a way that MFBs registers with a single credit bureau but enjoys information from all the credit bureaus in Nigeria.