Nigeria’s MfBs Open New Firm to Boost Financial Inclusion

Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele

The microfinance banking sector of the economy has floated a company, known as Microfinance Development Company Limited [MDCL], to address the problem of lack of wholesale funds for the sector, and boost operations.

It is an initiative of the National Association of Microfinance Banks and is aimed at creating an institutional platform that could access borrowed and special intervention funds for the microfinance sector, leverage the performance, impact and sustainability of the unit microfinance banks.

President of NAMB, Mr Rogers Nwoke, said the microfinance sub-sector was built to survive on wholesale funding to be provided by the Central Bank of Nigeria.

Nwoke is also chairman of MDCL, observed that for nine years, the sector operated without the needed whole funding to support its lending and refinancing activities.

He said, “Nine years later, the N220bn Micro, Small and Medium Enterprises Development Fund was launched and disbursed. Five years after, the microfinance sub-sector is yet to feel the impact of the fund as less than 10 per cent of the banks had to access this fund.

“The MSMEDF obviously was not the planned fund for the development of the microfinance sub-sector. As a private sector, industry-led initiative, the company MDCL is focused on addressing the funding gaps of the sub-sector.

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“With an authorised share capital of millions and ownership structure that spans the entire strata of microfinance banks in Nigeria, the company is ready to commence operations,” he said.

Nwoke, who is also the managing director of Hasal Microfinance Bank, explained that there was difficulty in convincing prospective investors and lenders to inject fund into financial services institutions in Nigeria.

He said that even some Deposit Money Banks, including those listed on the Nigerian Stock Exchange, were experiencing this difficulty, and there was the general market perception that MfBs were riskier than the DMBs.

He said this put the MfBs in a more difficult position to attract funds from sources other than their shareholders.

“A properly structured, well capitalised and operationally strong MDCL will mitigate this risk and be able to commercially funnel funds to MfBs that show sustainability prospects,” he said.

The Managing Director/CEO of MDCL, Mr Obinna Onunkwo, said the company would easily connect global and local financiers with microfinance banks, and strategically position MfBs to reach a wider market, provide them with financial and technical supports to rive competitive and affordable interest rates.