A finance consultant, Mr. Nuhu Danjuma, says Nigeria is the largest microfinance market in Africa, but that the sector has never benefited from cheap capital.
Danjuma told the News Agency of Nigeria in Abuja on Thursday that high interest rate charged on loans by the microfinance banks was because they did not have adequate operating capital.
His consulting firm works for the state-run Rural Finance Institution Building Programme.
“Currently, Nigeria is the biggest microfinance market in Africa; there has been little or no access to external capital, which is cheap and also gives the operators enough window to trade with.
“If you look at the history of microfinance banks in Nigeria, this sector is one of the few sectors that has never benefited from any cheap capital.
“Danjuma noted that in other countries one would find out that the government set aside funds for on-lending.
He said, “The reason there are high interest rates in the microfinance sector locally is that the cost of capital has been very high because first, they don’t have enough capital.
“And second, the little they get from local commercial banks is very high, therefore, they also need to lend at a high rate.’’
Danjuma said the firm was organising the first Nigeria International Microfinance Investment Forum in partnership with Microfinance Association of the United Kingdom on the platform of the International Fund for Agricultural Development and RUFIN.
The consultant said the forum would hold in July and bring international investors to Nigeria.
The investors, he added, would finance projects and give funds and grants to microfinance banks.
“This platform is to actually bring what we call microfinance investment vehicles to the country; these are funding agencies globally that are interested in microfinance banks,’’ he said.
He said the investors would partner IFAD and other 400 microfinance institutions.
He also told NAN that 10 international microfinance funding agencies, five local funding agencies and operators from The Gambia, Cameroun and India had showed interest in the forum.
RUFIN is an IFAD project aimed at reaching out to rural agricultural producers and NGOs through microfinance banks.
Danjuma said the project had 43 financial institutions and 33 microfinance banks that were working with cooperatives in the field of agriculture to facilitate savings, increasing and boosting agricultural production in the rural areas.
He observed, however, that the 43 microfinance institutions were under-capitalised.
“We realised that these 43 microfinance institutions working under the IFAD-RUFIN projects are under-capitalised.
Source: Punch
