The National Association of Microfinance Banks, NAMB, has called for a full implementation of the National Microfinance Policy, NMP, in the application of intervention funds.
Meanwhile, the association has asked the Central Bank of Nigeria, CBN, and Bankers Committee to reconsider its decision to establish a microfinance bank in collaboration with the NIPOST, saying it is not in the best interest of the subsector.
Making this call in a statement issued last week, NAMB said it reviewed the decision of the Bankers Committee and the CBN to set up a National Microfinance Bank, NMB, in collaboration with Nigerian Postal Service and observed that it runs counter-productive to the salient objectives of the NMP, Regulatory and Supervisory Framework for Nigeria as well as the objectives of the National Financial Inclusion Strategy.
Recall that the CBN had, in December 2018, proposed to establish the NMB due to poor disbursement of intervention funds to MSMEs, high interest rates charged by existing MfBs and the need to revamp moribund postal services system.
To this end, NAMB, which delayed in making its position known to the media on the proposed NMB, said that the CBN/Bankers Committee should utilize existing touch points and offices of existing MfBs which meet approved criteria to disburse its intervention funds including, but not limited to the Agri-Business, Small and Medium Enterprises Investment Scheme, ACGSMEIS as well as Micro, Small and Medium Enterprises Development Fund, MSMEDF, among others.
The association added that equity funds for the planned NMB should be channelled to support the NAMB initiative for a private sector led Microfinance Development Company Ltd to manage a Microfinance Development Fund as provided for in the NMP.
They stated: “This would be a sector-based source of wholesale funding and refinancing for the microfinance subsector.
“The CBN/Bankers Committee should consider a super agent banking license to NIPOST. NAMB is willing to partner with NIPOST as a super-agent for delivery of financial services across the 774 local government areas. There is need for an urgent engagement and dialogue between NAMB and the Bankers Committee to consider modalities and options for optimal utilization of the various intervention funds, particularly, the ACGSMEIS Fund by MfBs and effective linkage between the commercial banks on the one hand, and MfBs on the other for the purpose of on-lending.
“We believe that the Bankers Committee is driven by a strong commitment to improve financial inclusion across the country; so equally does NAMB and its constituent MfBs. A strong collaboration is truly needed to sustain financial inclusion growth in Nigeria.”
The association continued while explaining that issues involved in poor disbursement from the intervention funds are obvious to all stakeholders and are indeed not intractable.
It said that effective engagement of all stakeholders is required to effectively address them, saying: “Attractive as the idea of a new national MfB may appear, it is not likely to outpace the performance of existing MfB with extensive footprint and long history of community engagement in every nook and cranny across the country.
“The objective of furthering financial inclusion and support for MSMEs can best be actualized by these numerous MfBs with adequate engagement and support. We strongly believe that MfBs in the country will outperform all financial inclusion targets if all intervention funds and indeed other wholesale funds are made very accessible to them at all levels.
“The relative high interest rates in the Nigerian microfinance market stem from first, the incontrovertible fact of the expensive nature of delivering little bits of financial services. A N5billion big ticket transaction to one customer by a commercial bank is certainly less expensive than a MfB making the same amount of loan to thousands of micro-enterprises at N200,000 per transaction.
“Second, is the near absence of affordable and sustainable sources of re-financing facility against what obtains in every other nation, where microfinance has blossomed and supported micro, small and medium enterprises. For the reason of several factors in the Nigerian economy, the cost of access to foreign re-financing funds here (for an example hedging cost) is much higher than what obtains in most other countries in Africa.
“We very much call for an urgent engagement and dialogue between NAMB and the Bankers Committee to consider modalities and options for: optimal utilization of the various intervention funds, particularly, the ACGSMEIS fund by MfB and effective linkage between the commercial banks on the one hand, and MfBs on the other for the purpose of on-lending.”