For potential small scale and prospering rural entrepreneurs

Rural communities in Nigeria are mainly characterized by people with low levels of living. They are enmeshed in absolute poverty, low per capital income, low consumption levels and above all poor health service, high birth rates with limited freedom to choose between variables that satisfy human wants. Subsistence farming, petty trading and small scale enterprises are their preoccupations. And for sustainability and growth in trade, these rural communities mainly rely on traditional methods of financing such personal savings private money lenders and or thrift cooperatives. These opportunities for savings no matter their limited income provide credit facilities at little or no cost and they equally meet lending needs of investors.

Micro, Small and Medium-sized Enterprises (MSMEs) account for no fewer than eighty percent of the enterprises in Nigeria and the rest of Africa, and contribute a similarly high percentage of the continent’s jobs. The MSMEs in comparison with larger firms provide greater benefits to society in terms of job creation aimed at alleviating poverty. In most cases, the enterprises’ in ability to fulfill requirements for growth to excel in their chosen careers appear to be a big stumbling block to their dreams.

 To fill in the void created by the lack of access to growth and prosper, a job creating organization, Kajaura International Consults provides these Micro, Small and Medium Enterprises with access to much-needed risk-sharing capital and business development services. This body had since beginning of this year has been working in tandem with the Central Bank of Nigeria on behalf of the Apex Associations. It employs a three-pillar framework namely access to finance, access to business development services and finally access to markets to enable the MSMEs access to their needs to grow and thrive in today’s competitive global economy.

Equally for the record to promote the flow of financial services to rural communities, Ana-Elim (2008) posits that government had in the past initiated a series of publicity financed micro/rural credit programmes and policies targeted at the rural areas. Notable among them were Agricultural Credit Guaranteed Scheme, Nigeria Agricultural and Cooperative Bank Ltd, the Peoples Bank of Nigeria, and still in existence are the National Directorate of employment and the National Poverty Eradication Programme.

The condition of poor people in the society calls for programmes, policies and strategies aimed to alleviate their plight. The next thing that comes to mind after securing capital to enhance local businesses to thrive is safe keeping of the capital. The former Community Banking which now metamorphosed into micro financing banks comes to mind.There is no gainsaying the changing and multiplicity of programmes such as NDE, DFRRI, FEAP, among others were majorly to make the subsector effective to achieve poverty alleviation, rural empowerment and contribution to economic development. The frequent development in the micro finance programmes and policies are good indications that this subsector is yet to bring smiles on the faces of the Nigerian poor who are rather getting poorer on daily basis.

 According to CBN (2006), Micro Finance in Nigeria over the years had been characterized by weak institutional capacity. The report further explained “most if not all of these institutions’ poor performance are due to inept management, weak internal control, lack of insurance scheme, lack of well defined operations and inadequate regulatory framework”.

  As expected, it was in its resolve to address these identified lapses that the Apex Bank came out with the CBN Supervisory and Regulatory Framework in 2005. It has therefore gone to show that the institutionalization of microfinance in Nigeria is in line with the global strategy of using them to alleviate the poor people from the pit of poverty to empowerment. In the course of my self imposed investigation which led me to speak with some potential borrowers of the N220 billion intervention fund meant for MSMEs, the inadequacy of these microfinance banks appear to be a discouraging factor. They are of the opinion that, the current 949 microfinance institutions in Nigeria are still few when compared with the country’s poor population of over 80 million out of the 170 million Nigerians.

 How many of this number are in the rural areas? Why should the operators cluster in the urban areas, discarding the rural areas where majority of the poor people are based?

 The onus is on the regulatory authority of the microfinance institutions to adopt measures of encouraging the rural bankers to establish such institutions in the rural areas where their services are mostly required.

  For it to be a more result-oriented institution, microfinance banks should be classified into tiers, meaning first tier and second tier. While the first tier should be used to describe the urban microfinance bank, the second tier should describe the rural microfinance banks. Their legal operational requirements should be in the order of classification which should be tougher for the first tier. Their ‘paid–up’ capital should be different from each other. The ‘paid-up’ capital for rural microfinance banks should be lower aimed to attract investors to the rural areas.

The three tiers of governments are expected to lend a helping hand to the microfinance banks. In line with 2005 CBN Microfinance Regulatory and Supervisory Framework, it was outlined that for this subsector to survive, the Federal, State and LGAs will provide basic infrastructures. Ten years down the line, the condition of most of these banks are terrible. One may not be far from the truth the government contributed to the failure of the over 2000 microfinance banks bringing the figure to a little over 900 as at today. There should be a relief from taxes to operators of microfinance banks and their borrowers so MSMEs businesses will get a boost and grow stronger.

Edward Wabundani

Wabundani is a commentator on national issues.