Nigeria: Microfinance Bank - Untapped Window of Foreign Direct Investment

Sep 2015
Nigeria, September, 22 2015 - “We initiated the policy in microfinance banking some years back but the operators refused to take advantage of the international convergence of financers to attract foreign funds through direct equity participation, loans and grants for microfinance banks and institutions,” Enyinnah said.

Nigeria in the last 18 months has battled the sharp drop in foreign exchange inflow following the fall in crude oil price and the unhealthy general global economic outlook.

The development among other things in recent times forced the Central Bank of Nigeria (CBN), to adopt some monetary policy measures to safeguard the nation’s foreign reserves and remain economically viable within the committee of nations’.

Some of the proactive measures include a stop in accessing foreign exchange from the official market for the importation of about 40 items, among other things.

JP Morgan, an international economic rating agency also raised its concerns about the nation’s foreign exchange liquidity profile among other things and threatened to delist Nigeria bonds from the emerging market bourse.

Although the CBN has reassured Nigerians on the nation’s strong economic fundamentals, Mr Alex Enyinnah, Vice-President of the African Microfinance Transparency (ATM), said the concerns was unfortunate.

The concerns raised about Nigeria’s foreign exchange liquidity profile, Enyinnah argued, would not have arisen if attention was paid at the other potent sources of earning foreign exchange outside crude oil.

In a fresh voice towards diversification, Enyinnah said that Microfinance banks and institutions remains one of the newest and potent vehicles for attracting added new foreign inflows.

According to Enyinnah, who is also the Director of Programmes, at Grooming People for Better Livelihood Center, a microfinance institution, Nigerians have failed to effectively buy into the global trend of empowering micro-businesses, youths and women.

“Our late entry in the multi-dollar global business of empowering micro-businesses, entrepreneurs’, poor representation and interaction at international microfinance banks and institutions meetings robbed us of huge foreign inflows.

“We initiated the policy in microfinance banking some years back but the operators refused to take advantage of the international convergence of financers to attract foreign funds through direct equity participation, loans and grants for microfinance banks and institutions,” Enyinnah said.

The ATM Vice-President also insisted that Nigeria’s huge population of 170 million solidly leveraged the nation in attracting investments targeting the empowerment of the rural poor, women and micro and small entrepreneurs’.

While insisting that microfinance banks and institutions can attract more than 300 million dollars, geared toward poverty alleviation, he also floated a caveat that would make global financers to cavort and shift attention to Nigeria.

According to the Grooming Center director of operations, “Nigeria will only benefit from the pool of global funds, if operating microfinance banks and institutions internalize international micro-banking best practices and develop its micro-banking human capital.”

Expanding the submissions of Enyinnayah, Grooming Chief Executive Officer, Mr. Godwin Nwabunka, said microfinance banks in Nigeria must develop peculiar strategies of meeting the needs of micro and small businesses.

The strategies, as suggested by Nwabunka must be driven by a vision and mission that understands and appreciates micro and small businesses in Nigeria.

According to him, the recent growth of microfinance banks and institutions’ operations in Nigeria, especially in the urban centers, makes it imperative for operators to define standards and establish code of operational conduct or ethical standards.

Nwabunka insisted that contrary to other opinions, transparency and shared confidence between the masses and microfinance banks provides major link to economic growth, food security, youths and women empowerment.

The other gains of microfinance banks in an emerging economy like Nigeria, he said, are robust health provisions, education and general wellbeing.

But the unresolved issues surrounding the poor management of most microfinance banks and institutions in Nigeria, Nwabunka also said, challenged Grooming Center into bridging the gap through capacity building and strategic operational development.

To him, “our added mission as a microfinance institution is to prepare and reposition interested Nigerian microfinance banks to attract the attention international finance organisations.

“We have accepted to mobilise others in championing the development of domestic dynamic policies that will meet the peculiar need of micro-businesses, youths and women empowerment.

“Our experiences in Nigeria, especially dealing with micro-women entrepreneurs over the years and exposures to international management of micro credits compelled us in Grooming Center to assist in bridging the knowledge gap in the sub-sector,” Nwabunka added.

He said that Grooming understanding of the needs of the poor, women entrepreneurs, households and groups methodology in financial empowerment, earned the center confidence of international financers.

The International Finance Corporation, (IFC), in 2014 invested four million dollars  (N650 million) in Grooming Centre. IFC investments in Grooming targets  the increasing access to finance for up to 780,000 microenterprises by 2018.

The IFC’s investment will also help Grooming Centre offer increased financial services to economically active low income earners engaged in small-scale trading and productive microenterprises.

Grooming Centre, Nwabuna said, used the funds to meet the needs of micro-entrepreneurs nationwide, especially rural dwellers largely unserved with credits.

Outside IFC, Enyinnah identified Blueorchard vehicle of Swisserland , Triodous Bank of Netherlands, Regymbaotic, the Norwaygean Microfinance Initiative and the International Soil Facility and Development Corporation (IFDC) as some the global supporters of micro-credits.

The IFC support and others, he explained, assisted Grooming Center to expand its branch network to 387 branches from 300 in 2014.

With a staff strenghten of  2,000, active client base of 500, 000, mostly women group, the center had so far offered N2 million worth of micro-credits.

In all, Enyinna argued that attracting most of the international financers will remain a mirage untill operators appreciate the benefits of strong sectoral networking.

ATM, he said, provides him an enduring platform waiting for Nigerian microfinance banks and institutions to maximise toward attracting micro-credits for the bottoms to top empowerment and development of the nation’s economy.

“Socioeconomic development and empowerment is miracle but a function of aggressive contributions of Nigerians from diverse sectors.

“As the current Vice-President of ATM, my challenge is to woo more Nigerians to network, using the window to leverage professionalism, transparency of operations and attract more foreign exchange for Nigeria,” Enyinnah added.

Source : Daily Times

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