To say that wars are terrible events that should be avoided by all means is to put it mildly. They are very bad events in the lives of people and nations. It is not just the disruption that wars forces upon every ecosystem, also when men go to war, they destroy, not only lives but the things that sustain life, such that even after the war, life remains unpleasant for a considerably long time. In some cases, as in the Nigerian civil war, certain persons, regions and entities never fully recover. They actually change the course of history both for individuals and the countries or sides involved. In some cases, the reasons for the war harden rather than loosen, if post war reconciliation is not diligently and honestly implemented.
Nigeria is again back into war. Nobody can deny that. The method and objective may be different from those of the civil war but certainly a shooting war of some kind is currently under way. One of the things that happen during wars is that economic activity is disrupted; infrastructure is destroyed and everything becomes ad hoc, as people live by the day. Businesses are destroyed along with social life. All these things are taking place in full gear in Nigeria today.
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One of the economic sectors that suffer heavily in times of war is the social enterprise sector – people given to helping less fortunate people. The sector is usually focused on the poor and makes an effort to remedy their situation. Microfinance is an aspect of social enterprise and faces significant setbacks when wars break out. Nigeria has been at war for a long time now, though it has been waged in a stepwise manner by a fluid coalition of invaders, in an unconventional manner with the tempo increasing in measured steps. This is probably why some people, even in very high places, may insist that there is no war in the country. However, cities are being taken and citizens are being displaced – typical attributes of a war, and the consequences for her microfinance industry have been untold.
The current situation in Nigeria is that most microfinance institutions, particularly in the North, are going through a very difficult and life threatening period
The Nigerian microfinance industry is no longer fledgling, having passed through the initial stages of development and heading for consolidation, and maturity, before this war worsened. The development of the industry begins with feasibility, whereby operators struggle to prove that they could successfully operate. Lending without collateral is no tea party, no matter what we read of the experiences of the pioneers, like Grameen Bank. Once operators convince themselves, through performance and experience of successful lending and repayment, that they could provide loans to the active poor, then they begin to think of formalized structures and systems for running the business in a sustainable manner. Thereafter, issues of cost recovery and scale begin to take pre-eminence.
Most of the microfinance institutions in Nigeria have experienced this phase in their lives. The current situation in Nigeria is that most microfinance institutions, particularly in the North, are going through a very difficult and life threatening period. It is the experiences of these institutions over the past decade when attacks by armed bandits and other kinds of terrorists have routed most of their clients, not just in the North-East where the war is most serious, but also in many other states mostly in the North. As the war spreads uncontrollably throughout the country and rural dwellers continue to pay a heavy price for the inability of security agencies to secure the citizens, rural credit markets have virtually disappeared and access to funds by the active poor has become a pipe dream.
Operating in a theatre of war requires financial intermediaries to demonstrate certain attributes that help them to survive. Institutional strength, which is measured in different ways, including the ability to protect the staff from danger, is one of the attributes. A war is a calamity, and those uncertain about its impact can glean it from what ordinary COVID 19 has done to every entity. Its impact on cash flows and repayment capacity has been pervasive.
A lending institution should be concerned with the safety of its staff just as it is of its risk assets. In fact, the most important organizational priority at such a time should be the security of members of its staff. In the case of a microfinance organization, both staff and clients need to be protected by all means. Every well-meaning organization should have its security procedures properly codified, advertised internally and internalized, so that staff would avoid risky behaviour arising from ignorance. Microfinance banks must establish a strong culture of repayment among clients so difficult times would not automatically translate to delinquency or refusal to pay loans. Members, already groomed in the discipline of repayment are critical to the survival of lenders during calamities.
