7 solutions to microfinance challenges in Nigeria
The concept of microfinance banks was introduced into the Nigerian economy with the common aim of financial inclusion of backward and more impoverished sections especially the low-income earners.
But this objective or aim has been marred with a lot of problems; the success of the commercial banks in Nigeria can’t be compared to the rate of success that is achieved by the microfinance banks in Nigeria.
The microfinance banks have been plagued with problems that aren’t only structural or operational but even in their overall financial processes.
So there is no need only pinpointing these problems without marching it with correspondent solutions.
This page is here to outline the different solutions that need to be put in place to be able to make a success of the microfinance banks operation.
Support from the government
The government and the necessary authorities must come to the aid of the microfinance banks in Nigeria.
The microfinance banks must be given the necessary consideration; there should be allocation of a substantial budget and donations to the microfinance institutions.
This will boost the living conditions of people which will lead to the economic growth of the country as a whole through the loans that will allocated to the poor for business.
This is like a chain reaction, when the microfinance banks are well equipped financially, there will high loan-able funds which will be given out to the poor earners at a lesser interest rate.
This will not only rub off on the borrowers but it will boost the economy as well and makes it more buoyant
Donor organizations should also support
Donor organizations and others in the position to help should come forward to partner with the microfinance banks in Nigeria to drive their objectives.
It will go a long way in raising the standards for microfinance banks in Nigeria. The government should also encourage external bodies to key in to help the microfinance banks in achieving the aims of catering for those in the low class.
This will help in closing the gap between the high and low classes that are prevalent in our society today.
Better regulations need to be in place
The government needs to come up with policies and regulations that will be favourable to the microfinance banks in Nigeria.
There should be rules and regulations to prevent default risk for the microfinance banks. The apex of Nigeria must also work to favor microfinance to boost its growth
Take their management a notch higher
There’s a need for a proper management from the most senior person to the least worker in the microfinance bank.
Mismanagement or misappropriation of funds will only breed chaos and rancor in the system. So those at the helm of affairs must show true leadership by inhibiting fraud, stealing, or any form of negative activity.
The progress of the microfinance banks start with those in the management so when they get it right, then other things will follow right. So the management and workers need to do their bits.
Reduction in indebtedness
The first solution should be a reduction in the growing trend of multiple borrowing by clients or customers in microfinance banks.
Again, the issue of inefficient risk management should be tackled. There should be a reduction in the provision of loans without collateral which leads or increased bad debt.
Debts should be well monitored from making them become irrevocable debts.
Reviewed of Highest interest rate
The microfinance banks in Nigeria need to review their interest on credit facilities as compared to commercial banks.
The interest percentage rate must be a bit competitive with what is obtainable elsewhere to encourage customers to patronize them.
The microfinance bank’s lowest rate is 9% for an interest rate on loans for business while for commercial banks it’s about 6%.
So borrowers would shy away from borrowing and doing business with the microfinance banks if this trend continues.
The role of microfinance banks in Nigeria is a huge one and as such needs a lot of support to enable them achieve their laid down goals.
The problems confronting them can be solved if the above listed solutions are executed. The management and others involve to make these happens should go ahead to put the following solutions in place.
It won’t only help the microfinance banks in Nigeria but the whole Nigerian economy too.