I never planned this to have parts, my intention was to put together a problem solving article for my audience but along the line, it was too glaring that if I am to help those who will find this article helpful, I need to take time in explaining my points hence, I will make this a daily affair until this issue is trashed.
December 2013, Mrs Daniella Arul*** paid the last installment
for her 500,000naira loan to a microfinance bank. It was her third cycle. To access
another, she needed to shore-up her cash collateral by 20% of the loan she will
like to access.
Every week, she contributed 15,000, proceeds from her cloth
sales. She eye early March for her date of accessing another 800,000naira loan.
February 21, 2014, Central Bank of Nigeria (CBN) revoked
license of 83 Microfinance banks. Mrs Daniella's Microfinance bank was one of
them.
******************
Robust economic growth, the goal of any country cannot be
achieved without putting in place well focused programmes that increase access of
poor and low income earners to factors of production. This was the main
challenge defeated with the introduction of Microfinance Banks. Evidently, Micro-financing is here to stay yet the trend of
closure of these institutions raised great concern and erode public's
confidence?
Thus, I have come across many people who wish to do business
with the sector but the same question seems to come from them all...
ARE MICROFINANCE BANKS SAFE AND RELIABLE?
To start by saying Microfinance banks are reliable/not
reliable at this point may look too early thus I will begin with those issues
that are well known to the public which are circulating these 'dearth' fear
and those that are not too know and why microfinance bank might be your business
lifeline.
1. HUMAN CAPITAL
Human Capital remains the biggest problem of many
microfinance banks today and the reason started from here: There are three
different licenses for any microfinance banks namely i) Uni-license, 2.) State
license and 3) National license.
With Uni-license,
microfinance bank (mfb) is to operate from a single location, State license, a mfb can have offices
within a state (subject to CBN approval) and a National license give a mfb room to operate nationwide. The cost of
these license differs and as such, in other to save money many mfbs go for uni-license
- relying heavily on their staffs to cover areas they ought to have branches
thus, a mfb with office on the Island can deploy as many as 15 staffs to cover
Agbado/Ojokoro etc thereby making contact with the Bank very rare and fraud by
some staffs a high possibility.
In a situation like this, the only relationships many
clients have with the banks are either on passbook, Identity cards or ATM.
WHY YOU SHOULD BE
CONCERN
For those repaying their loans through these officers, there
is likelihood that your repayment is not hitting your account even with teller
issued (on field and stamped). Many officers
disappear once they know their game is about to get blown while the bank will
now be on your neck... Through this, many businesses have closed as banks
enforced recovery of their loan through any means including seizure of goods, properties etc.
No fraud without a smoke
An mfb with weak Risk/Audit department wake up too late to realize
the roof is on fire. Many of the failed mfbs are as a result of weak Risk/Audit department. No fraud can be perperuated once in a microfinance bank with huge sum of money being lost unless it is daylight robbery operation hence signs left in the wake of an ongoing operations ought to be investigated by the Risk/Audit department.
Also, no staff should have a permanent position. This make an officer a 'god' who can, overtime, perpetuate and manage frauds. Transfer of staffs to similar post is a good way to checkmate such occurrence and as customer, it is a development you should welcome with open hand.
WHAT YOU CAN DO
Establish frequent contact with your microfinance bank other
than you account officer.
Request/subscribe for sms alert, monthly email account
statement: This way, you can continuously monitor your repayment as you pay
them. When you fail to receive alert within a day or two, it is good to call or
visit the bank for explanation.
Make it a habit to have a separate record for all your
repayment and also visit your bank, at least once in two months, to reconcile
your account(s).
Alternatively, embrace repayment through corresponding banks, Point of Sales machine
or using any of the mobile banking platforms (bypass the officer).
Microfinance, like the conventional bank will ultimately migrate lots of active poor to a better, rich, level with enlightenment and daily betterment of the sector. The industry is barely 10 years old and these challenges are not outrageous.
Don Abiodun is business consultant, a radio host, cinematographer and a blogger. Follow him on twitter @donabiodun
***Continue tomorrow 04/11/2014
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