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Wednesday, November 13, 2013


First, micro finance in Nigeria, if not of recent years, is an area that Nigerian authorities have never given much serious consideration to; the focus of Nigerian authorities have always been on the major commercial banks who churns out bulk of their credit to government cronies and powerful business individuals. Apart from government agencies such as Central Bank of Nigeria (CBN) who turn their focus away from microfinancing (as at that period), Nigerian media itself is guilty of neglect and failure to turn their cameras on the industry thereby drawing the attention of the authorities to the need to develop the sector. Instead Nigerian media houses were busy with their long romantic relationship, that exist between them and big commercial banks who after all patronized these media outfit by given them billions of Naira worth of advertisement, not to mention the cheap credit they issued to them in order to keep their mouth shut from reporting negative stories about them. While the general public on their part are ignorant of the working and importance of microfinance to the socioeconomic development of the majority of Nigerian population who are poor and unbanked; it was under this condition that Nigeria’s microfinance industry come to be what it is today. 

     The efforts by the military regime of General Ibrahim Babangida to spread the adaptation of community banking failed due to the insincerity of the regime, faulty foundation, neglect and absence of regulatory mechanism to control the community banks. What is today formal microfinance sector in the larger Nigerian financial landscape came into being in 2005 with the formulation of national microfinance policy by CBN in line with Millennium Development Goals (MDGs); thus Nigerian authorities were forced by external pressure particularly from such bodies as the United Nations to seriously consider taken microfinancing a bit further as part of what is needed to achieved MDGs of the United Nations. Unlike in the case of Bangladesh where the authorities and other non governmental organisations saw the need to spread the novel scheme all over the country as a way of solving the country’s developmental challenges. This explain the pioneering role played by the Nobel prize winning Bangladeshi economist Muhammad Yunus in establishing Grameen Bank and revolutionizing the concept of microcredit not only in Bangladesh but worldwide.
   During his last visit to Nigeria in 2011 on invitation from First bank of Nigeria on occasion of its ‘Impact conference series’, Muhammad Yunus criticized CBN for not understanding what it is regulating as far as microfinancing is concerned. He faulted the Nigerian microfinance sector as not for the poor but for traders and suppliers,   that they are only found in cities and towns not villages and other rural communities, they lend base on collateral and not for starting business, they are not for women, charged exorbitant interest rate more than what is charged by commercial banks, and that Nigerian microfinance banks are owned by the rich instead of being own by the poor who are its main customers. In short what obtained in Nigeria as microfinance institutions are nothing but ‘micro-commercial banks’. All these are contrary to what obtain in the microfinance industry of Bangladesh where in addition to other good qualities banks go to the door step of the poor to provide their services instead of the poor coming to them. Yunus advocated the changing of the whole framework from the current profit oriented microfinance banks to that of a social business aim at reducing poverty that is everywhere in the land. 

       Because of the pioneering contributions of people such as Yunus, Bangladesh is no longer seen as ‘Basket case’ by the development community worldwide; live expectancy of an average Bangladeshi has increased from what it was in the 1970s, and poverty has been reduced drastically. It is up to Nigeria to do the same considering the percentage of people living below poverty line in the country, despite the enormous amount of wealth that has been cornered by the minority who are rich and the political class in the country. CBN, NDIC, SEC and all other stakeholders in the Nigerian microfinance industry must realized that not much change will be realized within the current state the industry is in, to move the Nigerian poor out of poverty microfinance should not be only about profit. Federal and state governments must provide large amount of capital to help provide cheap loan to the poor as well as bring more non governmental bodies to participate in the industry. Nobody is condemning profit motive in businesses such as microfinancing, but government has to put an eye on how the industry is run, with the view to prevent unethical practice by market participants.