Posted on July 2, 2009 - by boris
$8.4m grants to six MFBs Stir the Sub-Sector…
The World Bank and Federal Government
The World Bank and Federal Government last month approved the sum of $8.4 million grants to six Microfinance Banks (MFBs) out of over 800 operating in the country.
With the dearth of funds staring Micro Finance operators in the faces, the grants will no doubt serve as major relief, expected to be disbursed to the low income earners for which the institutions were created for in the first instance.
But commendable as the intentions of the World Bank and the Federal Governments may be, the selective disbursement is causing disquiet in the sub sector.
This is because currently, the country has about 800 microfinance banks and out these only six were selected for the grant. Besides, there were no explanations on the criteria for selecting the banks and particular purposes for which it was granted.
To other operators, the action is discriminatory and may not yield positive results considering the Nigerian factor – selfishness.
Poverty and unemployment is expected to be drastically reduced if the $8.4 million grant was disbursed to the poor.
This means that poor people will have access to cheap funds and be able to produce at cheap cost.
According to Microcapital report, the World Bank and Federal Government approved grants totalling $8.4 million to six Nigerian microfinance institutions (MFIs); ACCION Microfinance Bank (AMFB), Susu Microfinance Bank, LFS, MIC Microfinance Bank, Integrated Microfinance Bank (IMFB) and Micro Credit, each bank getting N205.2 million respectively.
Mustafa Bello, executive secretary, Nigerian Investment Promotion Commission (NIPC), made the announcement at the Business Development Services (BDS) Fair, organised by World Bank’s Micro, Small and Medium Enterprises Project (MSME) recently in Lagos.
Industry watchers see this as a step towards achieving the MFB policy target of covering the majority of the poor, but economically active population by 2020, thereby creating millions of jobs and reducing poverty, only if a good number of MFBs are involved.
Olutayo Adenekan, chairman, National Association of MFBs Lagos State chapter, sees the action as being selective.
“Government is not doing the right thing. Government has been selective by focussing only on six or seven banks. It is not right! We have close to 800 banks; government should have divided them into various senatorial districts and mobilise them.
It should be a massive mobilisation,” he asserted.
Prior to this grant, most microfinance banks’ access credit from foreign donors, non-governmental agencies, and commercial banks at high cost but these sources of fund dried up due to the effect of the continuous global financial crisis.
This was once acknowledged by Ukasoanya Innocent, managing director, Peace Microfinance Bank Limited, Abuja, who once said, “The current global crisis is beyond the level microfinance banks can cope with. The global nature of the crisis demands that response should be global in nature.”
These microfinance institutions were charging about five to six percent interest rate per month on micro credit to the active poor. This implies high cost of accessing loan, which consequently impacts on the prices of goods and services, thus high rate of poverty.
According to Olutayo Adenekan, chairman, National Association of MFBs, Lagos State chapter, “Most nations that I know particularly, developed nations are taking very strong measures to curtail the impact of the economic meltdown. It is the impact on their people they are trying to defend, and they do this by injecting money into the banks.”
“Nigerian government is not doing anything. We are the one likely to suffer more than developed countries, because even before the crisis we were weak. Automatically, it means that the individual Nigerian will suffer more than before because government is not offering to help.
If microfinance banks are to be of any use, government must inject money into them. Honestly, if government fails to do that, no bank, micro or non-micro can save the situation.”
The Microcapital report noted that World Bank’s micro, small and medium enterprise project in Nigeria, aims to increase the performance and employment levels of MSMEs in selected non-oil industry sub-sectors, and in three targeted states of Abia, Kaduna, and Lagos.
Total amount budgeted for the project is $60 million, of which $32 million is to come from the International Development Association (IDA), a division of the World Bank, and $24.6 million to come from local Nigerian sources.
The Business Development Services Fund is a component of the MSME Project, where the BDS Fund offers matching performance grants to business development service providers serving any and all MSME sectors, and promotes supply and demand of business development services through its industry supply chain development programme.
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