DEVELOPING COUNTRIES, MICROFINANCE AND ACHIEVING DEVELOPMENT GOALS by Don Abiodun Odedeyi

From the ditch of poverty, credit/loans services are spreading
financial freedom throughout the realm of economically active poor,
low-income persons and micro-enterprises especially in developing
countries. To this end, governments and financial institutions
continually look for ways of improving the sector; how to create
conducive lending platforms for medium and low income
business/individuals.

At the end of World War two, almost all of developed Europe benefited
from one loan scheme or the other. Some of the biggest benefactors
till date are Poland, Switzerland, and Germany (who, apart from low
interest loans also got many of it debts written off).
In Nigeria, the same idea of economic empowerment played out in the
creation of community-based lending institutions. During it first
thirty years of existence, micro-lending sector in the West African
state have seen different transformations, policies, over-hauling etc.
Popular among them was the Community Banks which ran between 1990 to
2007, the People's Bank of Nigeria, between 1989 to 2002, Family
Economic Advancement programme (FEAP) among others.

In 2007, the biggest and widely spread of these community-based banks,
Community Bank, was reorganized into Micro-finance Bank Banks (mfb)
with the aim of re-branding, block loopholes and giving more strength
to it.

Virus dwindling micro banks
Within two years of a robust restart, a major crack opened the newly
reorganized micro-banks. Quick intervention by the apex bank however
saved a waif-like; scores of the institutions that started strongly
became a hard lesson for others that survived the scare.
October 2012, one of the micro-finance institutions, by share of luck,
discovered an impending bombshell!

While going through her Black Book (an inventory of bad debtors and
other customers the bank won't like to transact business with), it was
discovered that some names on the 'Black Book' are re-accessing loans
with the bank. These individuals have been chased, searched for months
without success only for them to come back a year or two later.

Cross Carpet Debtor
September 17, 2012 was a cool bright day. A team of 11 officials of a
mfb (name withheld) moved on some unsuspecting loan defaulters within
it Lagos business district. After visiting three debtors, it was
established they allowed a certain Iya Oyinbo use them in securing
loan; they used their names to seek for loan then handed it over to
the woman. When the heat from the bank became unbearable, one of the
'victims' moved in with police on Iya Oyinbo. Reports filtered in that
she was under detection at Elere Police Station, Mushin, Lagos but on
getting to the station, two other financial institution officials were
waiting at the station deck, sweating, the person in custody wasn't
Iya Oyinbo but her younger sister.
Iya Oyinbo's debt tops several millions of naira and she is nowhere to be found.

As at the time of this writing, a month after, Iya Oyinbo is yet to
surface, several other cross carpet debtors have also been discovered.
The cancer is spreading, many 'customers' are gaining on this pretence
then fade away, move to another financial institution then disappear
again; pandemic looms over a key sector saddled with providing
financial service to about 65% of the country's population.

Is there a way out?
The absent of credit rating, which would have enlightened financial
sectors on customers' credit profile, was however waived aside by a
Lagos based financial expert (name withheld because he is not
permitted to speak to media). He bemoaned the state of national data
collection as a critical blow to any quest for credit rating agency.

"Loan disbursing officers should get to know their customers more,
this, not credit rating, will reduce the spate of cross carpet
debtors."

Chi-Tola Roberts, the managing director of InFocus PR lampooned the
non-utilization of several national data collections which has taken
place over the years.

"With the national identity card, voting registration, Sim card
registration, our journey to such national comprehensive database is
like sixty percent completed; the pocket few can be worked on with
time".

Data from the Central Bank shows that 8.5 billion of the 28.8 billion
(about 29.8%) earmarked for Small and Medium Enterprises Equity
Investment Scheme (SMEEIS) fund so far have been utilized, and about
ten percent of the fund meant for micro credit not yet touched. The
pressure of meeting up with Vision202020 could have set in motion,
rapid disbursement of these trapped funds yet dwindling confidence in
market structure may affect the ball being kicked to motion.

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