The Nigerian Deposit Insurance Corporation (NDIC) in its 2018 result announced worrisome figure about Microfinance banks Non-Performing Loan (NPL) that dropped to N25billion, 5.2 per cent decline from N26.18 billion reported in 2017.
The nation’s economy subsector does not operate in isolation as commercial banks are also faced with NPL, attributable to dwindling global prices.
The Nigerian economy last year passed through numerous challenges that include power shortage, dilapidated infrastructure, high cost of doing business, mismanagement of deposit funds by Managers of these banks, among others.
All these challenges are major factors contributing to the MfBs’ NPL over the years.
The economy has not been friendly, things have been very tough and prices are going up while income is coming down amid double digit inflation rate.
The subsector stands as the only means to reach those at the grassroot and it has not performed its mandate.
However, according to NDIC, the NPLs (portfolio-at-risk) ratio improved from 13 per cent in 2017 to 11.20 per cent in 2018 but still above the regulatory threshold of five per cent.
The report by NDIC, noted that the South-West Zone had the highest number of operational MfBs of 309, against 361 in 2017. The number of MfBs in the South-South region also dropped to 90 in 2018 from 112 in 2017. In the South-East, it dropped to 156 in 2018 from 177 in 2017. For the Northwest, it dropped from 132 MFBs in 2017 to 117 in 2018.
“The North Central recorded a drop from 184 in 2017 to 147 in 2018. However, the number of MFBs in the North-East remained unchanged at 42.”
The NDIC examined 294 MFBs, focusing on their operations, board and management oversight, risk management practices, internal control systems, and the level of compliance with applicable laws, rules and regulations.
Realizing the decline in operations of MfBs in the country, the Central Bank of Nigeria (CBN) in July directed operators to acquire 64 new customers per month.
The directive follows the revised national financial inclusion target that aims to accelerate progress towards the achievement of 80 per cent financial inclusion target by the year 2020.
As gathered by our correspondent, the enforcement across the country has been effective across the country but needs effective monitoring by the apex regulator
We urged stakeholders to re-strategically positioned MfBs to expand the financial frontier and stimulate the exploitation and development of economic opportunities in the informal sector through the provision of traditional and even non-traditional banking services such as technical and managerial, assistance, sale of output and input purchase financing, machinery and equipment leasing and community development financing.
Also, our position is that the government should recognize the need to achieve sustainable economic development. Resources must be channeled by The government towards financial empowerment of population in the rural areas and urban slums, improve the standard of living of the economically active poor, catalyze rural transformation and foster the growth of Small and Medium Enterprises (SMEs).
The microfinance banks are the cornerstone for the promotion of rural development through financial inclusion and financial literacy, deposit mobilization and credit delivery to finance microenterprises, boosting small-scale enterprises/agriculture by financing them or by acting as channels for on-lending funds to beneficiaries, generating employment, among others.
The National Association of Microfinance Banks (NAMB) must brainstorm on saleable products that stands a chance to attract customers to open account with their members and mandate members to comply.
Incentive must be introduced and members must be encouraged to work in line with CBN directive.