• Friday, May 24, 2024
businessday logo

BusinessDay

Assessing impact of microfinance banks in poverty reduction

businessday-icon

With one microfinance bank empowering its customers with N42.2 billion as of first half of 2014, one could agree with the operators that the institutions are making positive impact in terms of poverty reduction in the country.

Operators claim that microfinance banks (MFBs) have made tremendous contributions to the Nigerian economy by way of direct employment, infrastructural development, access to finance, among others.

Over 800 MFBs have disbursed a total loan of N97 billion as of December 31, 2012, as total borrowers stood at 5 million, total clients 6 million, and total branches/cash centres 1,732 in the review period. Microfinance banks total deposit was N125 billion, total assets N222 billion and total employees 22,000 people.

The establishment of MFBs in 2006/2007 saw the gradual end of community banks, which converted to MFBs and form the majority of unit licence MFBs today.

Deji Popoola, managing director, Finatrust Microfinance Bank Limited, said: “You will agree with me that it is very difficult for a typical Nigerian to work into a commercial bank to get N1 million loan. You will also agree with me that it is almost impossible for true genuine entrepreneurs to have access to financial accessibilities. Part of the things that the micro finance has truly done is to make this possible.”

MFBs have done a whole lot and this is reflected in “what we have done in Finatrust,” he said further.

The bank started as a unit microfinance bank in April 27, 2009, with approval-in-principle and got CBN final node on September 30, same year, with a share capital of less than N80 million.

The bank today has grown to be a state licensed microfinance bank with a balance sheet size in excess of N1.2 billion.

“This landmark achievement wouldn’t have happened without your support and business collaboration,” Ituah Ighodalo, the bank’s chairman, board of directors, said.

Just as commercial banking in Nigeria is more than 100 years today and yet they are continuously evolving, the same is microfinance banks, which are about five to six years old, Popoola said. “Microfinance banks are evolving and learning, and I am sure over time they will be able to achieve significant impact as much as what people expect,” he said.

Looking at the challenges facing MFBs, he said they include infrastructural challenges, natural apathy; as a lot of people were still being unbanked, among others.

“The challenges are typical to what exist in our day-to-day living. We have infrastructural challenges, natural apathy; a lot of people are still unbanked, that is why we in Finatrust specifically are very much desirous of the Federal Government policy of financial inclusion of everybody. We want, irrespective of your age, as long as you can write and use your mobile phone, you must be able to do banking,” he said.

The bank has a total customer base in excess of 5,000, and cumulative transaction turnover from all its correspondence banks is in excess of N24 billion.

“We have a total customer base in excess of 5,000 customers. Most significantly, in the last few years, we have taken considerable steps and established infrastructure that have distinguished us in the sub-sector,” Ighodalo said.

HOPE MOSES-ASHIKE