By Stanley Opara

Tuesday, 22 Feb 2011

Operators of microfinance banks in Nigeria have attributed the increasing liquidity pressure facing them lately to the restrictive credit policies of Deposit Money Banks.

They said owing to stringent measures put in place by DMBs for borrowers, there was a massive shift of potential borrowers to microfinance banks, causing huge pressure on microfinance banks.

Our correspondent also gathered that the liquidity problems that confronted operators last year, resulting in the closure of some microfinance banks, may not be unconnected to the drift of heavy borrowers to the micro segment of the economy following their inability to access facilities from DMBs.

The Chief Executive Officer, Bosak Microfionance Bank, Mr. Kola Bello, who confirmed the development, told our correspondent in an interview on Monday that it was unfortunate that some customers of microfinance banks now open accounts with the banks only to demand for loans shortly.

“For our kind of business, if deposits are not growing and credit on the other hand continues to rise, there will be a challenge,” he said.

He said DMBs were not really giving loans to borrowers lately, and the same had caused serious pressure of MFBs because most customers do not only what to borrow, but want to get loan conditions similar to that of MFBs.

Bello, however, urged operators of microfinance banks to consider the provisions of the law and know what the law required of them whenever they had such cases before them.

According to him, it was not proper to give out more than one per cent of the entire shareholders fund to one single borrower.

Corroborating the stringent credit measures still persistent in the financial system, the Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, while granting an interview to CNBC Africa television on Monday, that expansion in credit to the private sector had remained weak despite an accommodative monetary policy.

These complaints are coming at a time when the CBN is preparing to carry out its first quarter assessment for MFBs, and according to the National Chairman, National Association of Microfinance Banks, Mr. Mathias Umeh, the association had been communicating with its members to ensure that what happened the previous year did not repeat itself.

In the same vein, another Managing Director of a microfinance bank in Lagos, who to our correspondent in confidence, said the terrain was getting tougher considering the stringent measures put in place by the CBN and the realities on ground confronting players.

According to him, in a bid to survive, businesses would explore all accessible avenues for funds. He explained that for now, MFBs were seen as a good avenue to raise money following the “no lending” attitude of most banks.

“If the banks resume lending, I think we will have a better story to tell,” he added.

The apex bank had warned MFBs to maintain strong internal controls to forestall avoidable losses, as well as close unapproved branches, cash centres, customer meeting points, while adoption a true microfinance model.

It had also said, at the expiry of its three months deadline, that a comprehensive pre-licencing examination and capital verification would again be conducted before new licence would be granted to MFBs found eligible.

 

Source: Punch