The Chairman,
Aguda Titun Microfinance Bank, MfB, Prince Ndoma Odey Ndoma, in this interview
outlined numerous challenges that has bedeviled the microfinance subsector.
WHY is loan
default on the increase in the MfB sub sector?
Loan repayment in Nigeria is an
institutional problem.
The way people
come to take loan is different from when you are asking them for the repayment.
We understand that economic recession has made things more difficult but
our
attitudes are bad towards repayment. Most people have the capacity to repay but
they do not want to pay, they want to recycle the money. Our marketers too do
not go to collect the daily, weekly and monthly contribution as at when due,
this also make the beneficiaries to recycle the money. Governor, Central Bank
of Nigeria (CBN), Mr Godwin Emefiele Another thing is that they have marked
some banks as a violent bank so they always reserve money for them and take
others who use persuasiveness for granted.
The issue of general bad market also
necessitates the challenge in the repayment. Operating environment for
businesses in Nigeria is very turbulent and because of that turbulent nature,
you discover that when you buy, it is difficult to sell as required and to do a
repayment. The issue of interest rate is also a factor to some MfB because it
is not uniform rate. Sometimes when you collect N100, 000 and the interest rate
is N5, 000, plus the principal, within every month that you have to pay,
sometimes you discover that you are paying almost N25, 000. The enabling
environment is not also conducive, for instance, somebody is selling pure water
and bottle water and there is no light, the cost of going extra mile to buy ice
block erodes almost the profit of the person.
All of these is an issue for the
operators, but most importantly, is the attitude of the people; some are not
willing even when they have the capacity. The management of the banks sometime
allows only the marketers to do the monitoring and so sometimes the marketers
forget until when you are doing review to discover that there is an
outstanding. If we can work on all these things, I can tell you that though it
cannot eradicate the issue of loan default but default will be reduced to a low
level. Why is interest rate still high in the sub sector? The problem is that
we use social consent in granting loans, there is no collateral, it is
collateral substitution. Generally, the higher the cost of our fund, the higher
the cost transferred to the loan beneficiaries.
A customer gets N200, 000
cheque as loan without collateral and when there is a default, you have nothing
to fall back except to call the guarantors or using the bill of sales. Sometimes
when we follow that pattern of interest, before it gets to a certain level, the
bank would have gotten the capital only to pursue the interest to make it up.
However, if government can give us the N220 billion micro, small and medium
enterprises (MSME) development fund facility by making it available to MfBs at
a lesser rate say single digit, it will further help the operators. But the
N220 billion is available for MfBs? Yes, it is available, but there are
stringent conditions attached.
The fund is there but the conditions attached
are stringent, even the Bank of Industry, BoI, that said they want to give us
fund, we have not seen the impact yet. We have been seeing adverts that BoI is
saying they want to step in to fund the small and medium enterprises, SMEs, we
want to see their advert translate to reality. What do you want the CBN to do
on the fund? They should relax some of the stringent measures, so as to allow
MfBs access the fund. For instance, for you to access that fund, you must have
15 percent lien in one correspondent bank. You don’t even know when to get the
fund but you already have your 15percent of the amount you are processing lien
in one mega bank that you cannot withdraw. If that money is available, it can
be used to turn a business around.
The issue of BVN of these market people is
also a challenge, because some of these people, even when they try to operate,
they do not run the account. How is your bank blazing the trail in the sub
sector? We try to set up a good monitoring system and ensure a proper control
mechanism from the audit to the risk department. We keep reminding the staff to
get in touch with the beneficiaries before it gets to the due date. We also put
alert system in place which keeps reminding customers to repay.
0 Comments