We are talking about the need for authenticity, even among those who have answered the clarion call to help bridge the economic gap in our country. The challenge of economic exclusion is real, huge and present in Nigeria. Luckily, we have embraced the policy of microfinancing, which has proved successful in tackling this challenge in other climes. What seems to be amiss in our case is that we seem to be bent on corroding the efficacy of this poverty alleviation strategy by our approach to it.
There is no shortcut to effective service delivery, especially in microfinancing. One is either in touch with the grassroots or one is not. Fortunately, technology has been democratised and made reasonably affordable to all and sundry. Operators can no longer rely on native intelligence to provide 21st century financial services. Therefore, it no longer should matter if we are separated by distance from those who need financial services. In addition to some of the key features of a proper microfinance service, which I discussed last week, we outline a few more.
Many MFIs are tottering on the edges of technological illiteracy. They have perfected the art of living by the hunch. Major transactions pass only one acceptance test to be executed – the Manager’s Hunch Test. Once the manager thinks that a transaction is viable, he plunges into it. This should not be the case, especially for deposit-taking institutions. Management information systems that provide accurate information on all aspects of the business, and especially the key indicators, in a timely manner are now copiously available and should be applied to improve efficiency in the industry.
Such indicators not only highlight the health and direction of the MFI, they are useful guides to staff in driving the business because they provide direction. Working without such guiding information is like a pilot flying without radar. Such a pilot is practically blind even though he can see the bright blue sky ahead of him. More operators should join the ranks of the technology-driven service provider in the industry.
It is becoming a culture in Nigeria for operators of regulated business to circumvent regulations. They tend to disobey regulations because they are able to have their way with regulators at the end of the day. This is why those who are expected to make regular returns do not do it timeously. Such reports are either late in coming, bunched for several periods together or not sent at all. Regulators have continued to be lenient because of the softness of some of the regulated sectors and the desire not to damage the economy. This attitude of both the regulators and the operators is not limited to microfinance sector. It cuts across the whole economy. People do not obey rules because in Nigeria, there is always a way out of any rules.
The growth and prosperity of any sector of the economy always has much to do with its structure, rules and regulations and the behaviour of its members with regard to policy. The banking industry that for many years set the pace in returns and efficiency is a case in point. Investing heavily in the economy and working to circumvent the policies laid down to support the system is counter-productive. It is like shooting oneself in the foot because it puts the investment at a greater risk than normal.
Operators in regulated sectors, especially the finance sector, should play to the rules in 2016. They should avoid the practice of forging or buying documents needed to support their routine operational reports. This practice is gaining grounds in many segments of the economy and helps to beat the system and harms the very economic agents that practice it.
Compliance with legal requirements and regulatory directives is a mark of institutional strength. It reflects the organization’s leadership and capacity to do the right thing for the organization when it is most important to do so. Institutional viability is built around some core legal and operational fundamentals. These core requirements include proper legal registration and compliance with laws of the land. Organizations must also have very clearly defined internal rules that define the rights and responsibilities of both investor and management. The role of directors must also be clearly set out to allow for a smooth and crisis-free board. These fundamental house-keeping stuffs would help everyone to achieve their goals.
Directors of microfinance institutions will move forward in their bid to widen the coast for their institutions. They will do well to advance their understanding of the relationship between a company and its owner, even if the owner is the manager. Many are currently running the accounts of their institutions as if it were their own personal accounts. This has helped to complicate the case of loan delinquency in the industry. Recognizing the legal personality of the organization and treating its assets as different from those of the owner would make things easier in 2016.
This is another way of calling on the boards to wake up to their responsibilities. Regulators should ensure that the boards they approved are actually still in place. It is not completely far-fetched to imagine that some of the board get “dissolved” soon after they are inaugurated leaving a sole administrator to run the company. We need accountable boards.
These are boards whose members are not only knowledgeable in the field of business of their companies but also capable of proper oversight of the business. Above all, an accountable board works with the regulators to promote a healthy environment for the business to thrive. They interface regularly and meaningfully with the relevant publics to promote the business and its proper governance.
Microfinance institutions should continue to grow their outreach and do so more aggressively in 2016. In this regard, technology is key. Mobile money has come to stay and can no longer be ignored. Some leaders in the industry have announced their targets in this direction and it is very welcome news. Others must realize that outreach must have a focus. The core targets of microfinancing are the poor members of society, especially women. It should be advisable for operators to decidedly focus on these targets, and not just the growth of their loan books.
We had in an earlier piece here discussed the need for appropriate pricing of services by microfinance institutions. We must refresh our minds on the need to cover our costs, without being usurious. Operating and financial cost coverage is important and microfinance service providers should look to achieve or progressively move towards financial sustainability.
Emeka Osuji
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
