Posted on February 9, 2009 - by Gavin

High Default Rate Worries Microfinance Banks…

DESPITE the optimism being expressed in some quarters that the new economic framework, set up by President Yar’Adua to respond to the global economic crisis, would soon address the nation’s economic challenges, there seems to be a lull in the microfinance sub-sector of the Nigerian financial market.

The Guardian’s investigation, at the weekend, revealed that most Microfinance banks (MFBs) may have adopted a ‘wait-and-see’ approach to the release of funds due to the uncertainty surrounding the Nigerian business environment.

The reason, according to watchers of the industry, is not unconnected with the fear of possible default in repayment.

A source in one of the banks said that ‘guaranteeing Return of Investment has become the overriding consideration, and has almost relegated the allurement of Return on Investment (ROI) to the background, even this time that the global economic crisis is creating a sense of instability in Nigeria.”

He further cited Naira depreciation, delay by the National Assembly, to approve the 2009 Budget, and the dwindling prices of crude oil in the international market, as major issues that could threaten profitability and thereby jeopardise chances of loan recovery, even from small businesses… [click here to read the rest of this article...]