Micro financing, A Tool for Poverty Alleviation in Nigeria

Microfinance in Nigeria is a project with dual missions, Financial Sustainability and Social Responsibility.

Financial sustainability mission resolves to ensure that Microfinance Institutions are profitable for going concern. The Social Responsibility mission is to ensure that growth of the target clients is progressive and also ensure the products and services improve the lives and financial status of the targets customers.

Unfortunately, not so many Microfinance Banks focus on the Social Responsibility mission any longer; they have neglected the fact that solving problems is a process into financial sustainability.

The Central Bank of Nigeria (CBN) on the other hand has the responsibility to reduce poverty to a minimal level and has set up Microfinance and its Operational Guidelines as a tool to achieve this mandate.

Not long ago, CBN also put up NIRSAL (Nigeria Incentive-based Risk-sharing System for Agricultural Lending) MFB to help achieve the execution of some lending schemes targeting the financially under-served population. As much as there were some shortcomings reported; many achievements have also been recorded.

Obviously, the emergence of Fintechs is also playing huge roles in the strategies to help CBN achieve its goals regarding financial inclusion and poverty alleviation which were unconsciously ignored or overlooked by many Microfinance Institutions.

It is certain that CBN will continue to adjust strategies until the set goals are achieved.

Today, many Microfinance practitioners have opined that CBN has neglected the Microfinance sub-sector or that CBN is not giving adequate support in terms of funding as expected.

There is a need to understand that CBN has mandates and would go to any length to ensure the mandates are achieved.

There is no amount of advocacy that will force the CBN to disburse funds into an individual’s owned Microfinance banks for any of the Federal Government initiated lending Scheme for accountability sake.

The idea of going through a “Central Microfinance bank” owned by the CBN seems to be a better approach to be able to effectively monitor the progress of the lending Schemes.

A major area I would like the CBN to review is how to involve all other Microfinance Banks in the various lending schemes through NIRSAL MFB.

My opinion is that all willing MFBs should be recognized as aggregators for the lending schemes where participating MFBs can apply on behalf of the borrowers digitally while disbursement goes directly to the borrowers’ accounts and the concerned MFB’s account is credited with an agreed aggregator’s fees.

The current digital loan processes of NIRSAL MFB can be expanded and reviewed to take care of all the risk that could be thought of in this proposed arrangement.

With this, more people from different locations across the country will have access to the lending schemes at NIRSAL MFB and also, Microfinance Institutions will be engaged and not feel neglected in the national lending schemes.

It is a fact that with the present procedures of the lending schemes to different economic sectors at NIRSAL MFB, many eligible targeted clients may never access the funds and the current beneficiaries will always devise several means to continue to benefit from the schemes directly and indirectly.