Posted on July 6, 2009 - by boris

MFBs hopeful on positive signs for profits in second half year…

BUSINESSDAY

Microfinance   bank operators have admitted that the effect of global financial crises in the first half year was an eye opener to them assuring that they were now ready to take the bull by the horn in terms of mobilising more funds as strategy to economic recovery in the next half year.

To this effect, not a few of them say they are optimistic that the next six months would be much better when compared to the last half year. They insist that now that the economy has started to improve slightly, especially as evidenced in the price of oil hitting about $70 as against the $45 early this year, even as there is also noticeable improvement in the capital market.

Speaking on his plans and strategies for the next half year, Victor Mfon, director, Business Development Manager, Olive Microfinance Bank Limited disclosed that his bank will seek additional funding to be able to penetrate additional markets.

Through this, he maintained that it would afford his Bank to intervene in the lives of a “greater number of our clients to rescue them from the grip of poverty,” adding that it would also “aggressively grow our liability and gain more market share.”

Mfon nonetheless expects the global financial crises to abate in the next six months, even as he expects an immediate resolution of the Niger Delta crises and speedy return of Nigeria’s production level to its previous oil quota.

With the change in the leadership of Central Bank of Nigeria (CBN) he looks forward to sanitisation of the banking industry by CBN and increased confidence in the system.
Mfon anticipates among others, stability in the exchange rate to a mark lower than it is currently, suggesting increase in oil prices and improvement in foreign direct investment and forex before the end of this year.

It is an undisputable fact that microfinance banks in the first half of this year were confronted with more challenges in terms of fund mobilisation compared to the same period last year.
Foreign support and lending from commercial banks for instance dried up as a result of the melt down. Consequently, some microfinance banks set up to empower the active poor by providing them with micro credit and employment, laid off some of their workers in a bid to cope with the financial crisis.
As a result, poverty, meant to be reduced through these micro credit institutions reared its ugly head in the first half of the year.

This was unlike the first half of last year, which marked the beginning of MFBs in the country. Then price of oil was $147 per barrel, naira exchanged for about 118 per dollar, stock market was yet booming and there were more funds for the industry to lend to the downtrodden.
Denis Omenuwa, managing director, Festac 77 Microfinance Bank, Lagos, meanwhile described the period under review as “being very challenging and stressful.” He noted that “this could well be attributed to the so called global economic meltdown.” He too observed that the first quarter of last year was better than first half of this year.

Reason for this, in his estimation was because: “We had money to play around with; being first half of the coming of most microfinance banks, capital was still intact. Lots of loan disbursements were done in the first half of last year.”

However, first half of this year, from all indications has not been encouraging at all, “top of which is the fact that conventional banks are not willing to partner with MFBs again, citing global crisis as reason for decline of facilities previously granted. Many of them just refused to renew already existing relationships.”
Some of the MFBs in Lagos, in addition to the effect of global crises no doubt suffered considerable loses also due to the Lagos State demolition exercise which aims at turning it to a mega city.
“Likewise, deposit base declined considerably compared to the first half of last year.

In my locality, most retailers have been displaced as a result of Lagos State government plan of turning Lagos to a mega city – displaced customers of the bank who are either loan customer or daily savings customers cannot be located and as such, lost lots of funds and clientele base.
“You see, we are supposed to apply this financial services to reduce poverty but crises in the whole system has affected this financial technology called microfinance in reducing poverty”, Omenuwa said.

However, he remains optimistic that next half will be better, “provided we are able to increase our working capital by partnering with other parties that have passion for people. Microfinance is not all that highly profit oriented, the more reason, government involvement is required.
“Individuals cannot adequately fund microfinance business today. So, our strategy for next half is to partner with other parties in the financial world,” he stated.

To Rufus Oluyole, managing director, Havilah Microfinance Bank Limited, Lagos, plan and strategies will continue in line with the success achieved so far, especially in the first half of the year by reaching out more to the grassroots and supporting small businesses and traders.
“We are reaching out to various local governments in the states under our public/private partnership programme. We are setting up entrepreneurship training scheme and partnering the council areas in Lagos State to assist youth in skill development, training and women/widow empowerment. We are opening customers meeting point and bring our services nearest to the people.

A systematic grassroots marketing and product development is on our agenda for the next half of this year,” he explained.

Source:http://www.businessdayonline.com/index.php?option=com_content&view=article&id=3576:mfbs-hopeful-on-positive-signs-for-profits-in-second-half-year&catid=107:microfinance&Itemid=328