Working capital loans diversion makes loan refund difficult – CEO, Ilisan Microfinance Bank

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The Chief Executive Officer, Ilisan Microfinance Bank, Mrs. Oduyoye Adesola, has said diversion of working capital loans to consumption loans makes it difficult for loan defaulters in the Microfinance Banks (MfBs) pay back. In this interview with KAYODE TOKEDE, she predicted that the MfBs sub-sector is expected to grow this year, stating further that CBN’s   timely disbursement of the N220bn MSMEDF is critical to those in the rural  area.

What are your expectations for the MfB sub-sector in 2018 after Nigeria exited recession last year?

The era of recession has passed and the nation’s economy is expected to improve gradually which invariably means MfB sub sector will also grow too. We are going to witness more borrowing and more deposit in the sub-sector this year.

 

How can the CBN formulate a system that will allow the N220billion Micro Small & Medium Enterprises Funds (MSMEDF) accessible to those in the rural areas?

CBN should formulate policies that are accessible to MfBs, so that the unit MfBs in the rural area will be able to meet the criteria for accessing those funds.

Also, those in the semi urban area that met the conditions should be disbursed to on time, so that the people at the pyramid that we are expected to serve, would be served on timely. Timely disbursement is very critical and further delay in the disbursement might discourage those in the rural area most especially in Ogun State where our office is located.

 

What are the factors behind high loan default in the sector?

Loan default is high in all banks both Deposit Money Banks (DMBs) and MfBs. This is as a result of the recession in the economy. There is diversion of working capital loans to consumption loans which makes it difficult to repay back. Also, our legal system makes it easy for defaulters not to take payment of loans serious at all.

Likewise, the policy behind how MfBs calculate their loan default is different from how DMBs does their own, which makes all loans of MfBs to be classified as lost just after 90 days after disbursement of the loan.

Interest rate in the Microfinance sector is higher compared to commercial Banks in the country. Why so?

The cost of fund to most MFBs is on the high side. Especially to the unit MfBs who don’t have access to cheap funds. Most deposits are sourced from depositors who collect interest on their deposits.

 

Reported incident of MfBs using Police officers to arrest defaulters has been on the increase. Why so?

Not only in MfBs. DMBs also does the same thing. It is just to call them to order when all means of making them to pay prove abortive. Since not all cases will be taken to court despite that our judicial system which gives defaulters means of excuses for defaulting. On how we handle defaulters, we at Ilisan Microfinance invite them for discussion on ways and methods of paying, even, if it means collecting it in form of daily contribution. Their guarantors will also be involved if need be. The last option is charging them to court.

 

Are Commercial Banks’ operation in the SMEs sector is overcrowding those in the MfBs?

The operation of commercial banks in SME sector cannot be overcrowded. The percentage of the unbanked adult is still on the high side in Nigeria. Therefore, the market is big for everybody to participate in.

 

Take us through Ilisan Microfinance Bank Products and Services and its impacts on grassroots?

Ilisan MFB has so many products and services that can impact positively on the lives of the populace within Ilisan and its environs. At Ilisan Mfb now, you can receive or send money to your account anywhere in Nigeria, Own an ATM card that can be used anywhere in Nigeria, transfer to all West African Countries through Rapid Transfer, Western Union for all international withdrawals, home services to our old citizens, prompt cheques payment, Use of POS machine, among others.

 

What are the major challenges in your area that needs quick attention and how they can be addressed?

For now, there are no major challenges that needed attention urgently that will impact negatively on business activities.

 

How do you generate funds to assist market women and artisans that need capital to expand their business?

We generated mostly all our funds from deposits from our customers, which is invariably given back to those that needed it for business expansion.

 

Where will Ilisan Microfinance Bank likely to be in the next 5years?

In the next five years Ilisan MFB will be among the leading MFB not only in Ogun State but in Nigeria as a whole.

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