Microfinance banks loan book rises on CBN’s interventions, fintech injection

Amid struggles to meet the recapitalisation deadline by the Central Bank of Nigeria (CBN), Microfinance Banks (MFBs) grew the most ever loan book in the first quarter (Q1) of 2021.

Data from the CBN show that MFBs loan book grew by 67.73 percent – N2.47 trillion in Q1’2021 compared with N1.47 trillion in the corresponding period of 2019.

The increase in MFBs’ loan was as a result of the CBN’s intervention funds to NIRSAL Microfinance Bank as well as Fintech infusion into MFB business, according to ‎Rogers Nwoke, national president, National Association of Microfinance Banks (NAMB).

Nwoke also attributes the loan growth to post-lockdown activities of MFBs, saying that it is all good for the economy.

The CBN, in March 2020, set up the N50 billion loan facility to be disbursed at single digit through the NIRSAL Microfinance Bank for households and small- and medium-sized enterprises (SMEs) that would be particularly hard hit by COVID-19, including hoteliers, airline service providers, health care merchants, among others.

Two months ago the CBN revealed that 585,593 beneficiaries had so far received N462.722 billion as of May 28, 2021, from its various intervention schemes to support MSMEs and individuals.

Currently, the CBN has 37 intervention funds targeted at stimulating the economy and addressing issue of unemployment.

Financial Technology (FinTech) has transformed the financial landscape, offering wide range of opportunities and spurring new products and services from payments to financing, asset management, insurance and so on.

For instance, Sparkle, Nigeria’s digital bank, will by September 2021 commence loan services to individuals and small businesses across the country.

Read also: Don’t grant loans, advances, CBN instructs payment service banks

The digital bank, which provides financial, lifestyle and business support services to Nigerians across the globe, is currently building its engine that would enable loan service delivery.

“We also want to lend differently to people and we want to lend at a price that is very competitive and not the typical pricing that you see from financial banks,” Uzoma Dozie, founder/CEO, says.

The MFBs loan book stood at N329.06 billion as of December 2018. Nigeria’s microfinance banks migrated to the International Monetary Fund (IMF)’s Standardized Report Form (SRF) in January 2020. The template captures data from December 2018.

Responding to the growth in MFBs’ loan book, Onoja Usman, managing director/CEO, Lovonus Microfinance Bank Limited, states that MFBs loans increased because the response to loans requests and disbursement of loans are faster in MFB than commercial bank.

“MFBs are to support SMEs and the implications on the economy is growth and development,” he says.
Total assets of Nigeria’s MFBs rose by 38.57 percent to N3.46 trillion in Q1’2021 from N2.49 trillion in Q1’2019, the CBN data indicate.

Kazeem Olanrewaju, managing director/CEO, Baobab Microfinance Limited, notes that growth in risk assets or credits was due to the impact of devaluation since the country rely on importation.

He says it was also due to the effect of inflation on the economy and associated credit demands, post covid catch up, use of technology that has increased access to credits, and the entrance of new players in the lending space.

Other reasons include low interest on deposit or treasury activities due to CBN policies, banks now create more risk assets, monetary and fiscal policies that make holding cash unattractive and not profitable, and in line with expected growth in risk assets in the banking industry in general.

However, as some of the MFBs still struggle to meet up with the recapitalisation deadline set for April 2022 by the CBN, some of the microlenders that have sold off their businesses include Cardinal Rock MFB, Cowries MFB, Aguda Titun MFB, First Ideal MFB, High Street MFB, MoneyWise MFB, Owotutu MFB, Irolu MFB, and Royal Blue MFB, among others.

The CBN had in October 22, 2018, reviewed upward the minimum capital requirement of the three categories of MFBs as follows – Unit microfinance banks from N20 million to N200 million, State MFBs from N100 million to N1 billion and the National MFB from N2 billion to N5 billion.

The CBN has disbursed about N700 billion in various agricultural programmes and as of January 2021, the CBN had disbursed N554.61 billion to 2,849,490 farmers to boost food security under its Anchor Borrowers’ Programme alone since 2015.

Under the N1 trillion real sector fund, a total of 234 real sector projects valued at N857. 644 billion were approved and disbursed from November 2018 till May 28.

Of the total 234 projects, 155 real sector projects valued at N615 billion were financed from January 2020 till May 28, 2021: 78 manufacturing projects – N256 billion; 36 agricultural projects – N84. 481 billion; 30 Service projects – N191 billion; and 11 Mining Projects – N83.5 billion.

Data from the CBN show that as of January 2021 till date, N157.517 billion have been disbursed for 29 real sector projects under the Real Sector Support Facility- Differentiated Cash Reserve Requirement (RSSF-DCRR).