POVERTY: Nigeria: Micro-finance banks key to tackling poverty

Mar 22, 2011 :  OLASUNKAMI AKONI

Chairman, Lagos State Micro-Finance Institution (LASMI), Bashorun Sikiru Alabi-Macfoy says Micro-Finance Banks (MFBs) in the country are key to eradicating poverty in the society.
Alabi-Macfoy spoke at a Special Workshop, Awareness/Launching Programme at the weekend with the theme, The Role of a Micro-Finance Bank in a Developing Economy, organized by Ojokoro Micro-Finance Bank PLC.
According to him, alleviation of poverty was the reason why MFBs were established, saying that there was no way the conventional banks could help to eradicate poverty as they could not give out loans without asking for collateral or seal of ownership of a landed property.
“There are so many petty traders that need N10,000, N20, 000 to do their businesses and most of them are bread winners and so if we can encourage them, the better. Some use N5,000 to buy pure water and they have the capacity to sell N20, 000, so if the Micro-Finance Bank can loan them N20,000, they will be able to make more money,” he stated.
He disclosed that the Lagos State Government had so far disbursed N1.3 billion to some Micro-Finance Banks in the state so that they would have the means to lend out some money to grassroots people at a reduced interest rate without collateral in a bid to tackle poverty.
Special Assistant to the Lagos State Governor on Micro-Finance, Mrs Funmi Adesina, who was the guest speaker, said micro-credit financing had grownfrom a concept to a movement.
“Nowadays, even though its impact to single-handedly defeat poverty is still a subject of intense academic debate and research, micro-finance banking has metamorphosed into an institution with the supporting framework to advance the cause of wealth creation/poverty alleviation in developing economies.
Micro-financing as a concept is still and will remain an everyday reality with us, especially since its deployment as an instrument for wealth creation among the poor in developing economies,’ she said.
Adesina said the reason for this was that majority of people in developing economies were poor and were considered not credit worthy by the formal banking sector because they lacked the required collateral to either obtain loans from commercial banks or generate the required income from the capital market for their businesses, stressing that the emergence of MFBs had helped to bridge the gap.
Speaking on the ‘The Role of a Micro-Finance Bank in a Developing Economy’, Adesina urged MFBs to possess some financial qualities and means of real banks, saying that in the past many MFBs which collapsed left many of their customers in penury and debts. “I will therefore urge that sound financial regulations and risk management rules must be practiced and adhered to at all time by the management of micro-finance banks.
The intervention of the Central Bank of Nigeria recently along these lines that I have suggested, to stabilize this sector following the crisis, lends credence to the important role micro-finance banks are expected to play in a developing country such as ours.
“Micro-finance banks must subscribe to a code of ethics in the conduct of their operations. They are the banks for a large segment of the population whose energy will be disruptive of the entire system if it is untapped for the common good,” she stated.
http://www.vanguardngr.com/2011/03/micro-finance-banks-key-to-tackling-poverty-lasmi/