N220bn MSMED funds: Criteria too stringent for those in rural areas — State Chairman, NAMB

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The State Chairman, National Association of Microfinance Bank (NAMB), Adamawa chapter, Mr. Jonah Vandi in this interview with KAYODE TOKEDE, highlights some of the short-comings of the Micro, Small and Medium Enterprises Development (MSMED) Fund of the Central Bank of Nigeria (CBN) and plans to increase minimum capital requirement.  He also provided insight to lending activities in Adamawa, calling for government support in fighting poverty. Excerpts:

What is taking on plans to increase minimum capital requirement of MFBs with a view to enhancing their performance?

In the first place, I think we will have to go back on why MFBs were established. MFBs are supposed to serve as a link to reach those at the grassroots.

The Unit MFBs are playing a major role in government transformation in rural economy activities. If the federal government is thinking of increasing the share capital of MFBs, they must have to re-think over it and look at why the MFBs were actually created. If you look at the economy of Nigeria at the moment, a lot of poor people are living in the rural areas.

These people do not have access to credit. For federal government to think of increasing Unit MFBs capital base, you will ask how the capital raised is going to impact on unit MFBs.

If government actually wanted to promote activities at the local level, they   should be thinking on programs that will eradicate poverty. I think the increase in capital is a welcome idea but what does government want to achieve with the increase?

The CBN is the supervising agency of all banks in Nigeria and they belong to government. I believe CBN will not come up with a policy without the federal government behind it.

Well, some MFBs might merge another welcome development but what about the impact on financial sector generally. I think the government may not really agree to the idea that MFBs should be reduced in number

If Units MFBs merge, their operations will be consumed by bigger MFBs, making it hard for government to reach those at the bottom of the pyramid.

The apex bank should be introducing empowerment programs that can take care of the poor people. The federal government and CBN should look at the impact on those at the bottom of the pyramid.

If government wants to eradicate poverty at the grassroots, they should involve healthy Units MFBs in Nigeria. What is stopping CBN and government in supporting the Units MFBs in ensuring that economy activities reach them? I am of the opinion that rather than increasing the capital base, government should utilize the Unit MFBs effectively.

 

How has the N220billion MSMED Fund assisted in growing SMEs in your area?

I may not be able to talk about the success stories but I wanted to ask, is the CBN actually using the local banks in the N220billion disbursement?

I believe that before you access that fund, there are criteria layout and most of these Unit MFBs may fall short in meeting those criteria. CBN has provided the fund but most of the conditions are not met by Units MFBs located in the rural areas.

Government should listen to complains of Unit MFBs. If government wants to carry out economic reforms to the grassroots at the initial stage, local Unit MFBs should be carried along.

It is strange that government is not including Unit MFBs in its program meant for people in the rural areas. All I know is that a lot of Unit MFBs are not located in the cities.

MFBs are trying in their own way but they need assistance of CBN, other economy players. We need more incentives from economy regulators. We should actually be involved more in policy and activities implementation of CBN and federal government.

I strongly believe that MFBs are located in places government should be interested in. For instance my location is Adamawa State. My office is about four hours driver from the state capital. Majority of my people are farmers and even the farming period is around four months .It means, you have to take about 60 per cent risk in any farming activities. The issue of investing in irrigation is a must in my state. How, how many MFBs can actually finance agriculture business which is about 12 months credit and still make money?

Mind you, the Unit MFBs capital is N20 million. If I have to finance agriculture, which is mainstay of Adamawa, it means the fund available for me to invest should be utilized between 4-9 months. How many people can I finance within the short time? The federal government has the Agriculture Guaranty Credit Scheme (AGCS). They only guarantee but they do not give us subsidy whatsoever.

The N220 billion, if the CBN can utilize the MFB effectively, I see that the program will be felt more at the grassroots than when politicians are involved in the disbursement .

 

How has the Biometric Verification Number (BVN) cost effect impacted on your operations and level of compliance?

The CBN has done a wonderful job in the introduction of BVN. Our challenge initially was means of identification. Am happy the CBN relaxed some of those conditions. In my own MFB, we have achieved 80 per cent BVN enrollment. Adamawa collectively is doing well in BVN registration. Infact I enrolled more than 50 customers every day. The exercise has eased identity theft and let us know our customers better than before.

 

What is the level of state government collaborative effort with MFBs in job creation?

The state government is trying but has limitation due to capital. The local government workers in the state are owed salary and until then, local activities remain stand still.

 

Despite the challenges in Adamawa, what ways have you been able to recover loans?

Loan recovery is a major issue in the financial sector and people used different means to obtain loans depending on their locality. I know some people use traditional way to recover loans while other use police. The best means of loan recovery is Knowing-Your-Customers (KYC). If you have KYC, you should know what you can do to recover you loan. Every MFBs should adopt the KYC principle in loan recovery.

 

How can the regulating bodies enhance financial inclusion in your state?

My state is one of the poorest states in terms of economic activities. The only way we can alleviate poverty is by bringing out program that will reach those at the lowest level if government, key stakeholders should be focus on programs that can develop and stimulate business activities in the state.

Honestly, the challenge in Adamawa state is poverty. If there is anything key stakeholders can do to enhance financial inclusion, they should come up with a program that will alleviate poverty.

One of those programs is federal government plans to give N5,000 to jobless youth. A lot of our youths have no job.

 

What Services and Products do you offer to young entrepreneurs that wanted to state business?

It depends on the business young entrepreneurs want to start. As a Unit MFBs, my limitation is based on what we call single obligor. If you want to start ‘Akara’ business, I will ask you to form an association.  We have other similar products across the MFBs, although we are not in competition with commercial banks.

 

Is it true that the banks activities in SMEs sector is overcrowding those in the MFBs

We may be sharing the same customers but our products are different and perception about customers also different. We customize our products and services to suit young entrepreneurs and surpass what they are expecting.

We are not really into the same market. The commercial banks have their own product. We are supposed to be operating at the micro level. I grow a customer and handover to a commercial bank.

My projects are Micro and commercial banks can take my customers when they outgrow my products. My idea is that commercial banks can take as many of my customers.

 

 

 

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