The Nigeria Deposit Insurance Corporation (NDIC) has revealed that over 80 percent lending by Microfinance Banks (MFBs) in the South South geo-political zone goes to the oil and gas sector and financing of local purchase orders (LPOs).
This is as the Central Bank of Nigeria (CBN) has pegged the maximum the MFBs can invest in treasury bills to 20 percent to avoid starving the poor of fund by operators who want to avoid risk.
NDIC said the position of the regulatory provision was that MFBs should devote at least 80 percent of their loanable funds to the active poor by financing the minor trades and activities where the poor participate.
Adetutu Ogunnaike, the deputy director, other financial institutions supervision department, NDIC, said this while presenting a paper at a two-day workshop for operators in the microfinance banking sub-sector in Port Harcourt which opened on Monday.
Ogunnaike made it clear that the objective of the microfinance business is to alleviate poverty, regretting that the operators viewed profit as the primary target of their involvement in the industry.
The NDIC deputy director said that MFBs are different from commercial banking, regretting further that most of the MFBs that went under were run down by operators from the commercial banks.
Ogunnaike remarked that huge opportunities abound in the microfinance banking sub-sector, saying there are many activities which the commercial banks would not dare to touch but the MFBs could easily and most profitably exploit.
She said the supervisory framework was like a Bible to MFBs which they should consult on a daily basis and upon which international donors and the Federal Government would dwell in dealing with the minor banks. She, however, said the CBN and NDIC have listening ears as far as regulating the MFBs are concerned, adding that most of the regular changes in the guidelines were as a result of suggestions and outcries of the operators.
“If you are not there, we will not be there”, she declared.
The deputy director stated in her 34-page paper that the microfinance industry has over eight practising groups including commercial banks, MFBs, cooperatives, insurance, development finance institutions, etc, but assured the MFBs that despite the crowd, that the coast was clear for the real practitioners to dominate.
“It is like on our roads where there are trucks, cars, and motorcycles. The truth is that despite the crowded transporters, the bikes still survive and even have advantage over others”