by Christopher Maggio -

MICROCAPITAL BRIEF: The International Finance Corporation (IFC) to Provide $3m to AB Microfinance Bank Nigeria Limited

The International Finance Corporation (IFC), the investment arm of the World Bank, has announced that it will provide a loan worth NGN 450 million, the equivalent of over USD 3 million, to AB Microfinance Bank Nigeria Limited, a Nigerian microfinance institution (MFI) [1,2,3]. In turn, AB Microfinance Bank will provide loans to “microenterprises and low-income entrepreneurs in Nigeria” [1]. The tenor of the loan is five years, and is denominated in Nigerian Naira [1]. This will eliminate foreign exchange risk for AB Microfinance Bank, thus allowing the MFI “to offer long term Naira products to its customers” [1]. In October of 2008, the IFC provided AB Microfinance Bank with a NGN 150 million loan, the equivalent of over USD 998,000, which was used to help the MFI begin operations [1].  AB Microfinance Bank Nigeria Limited was created in 2008 by Access Microfinance Holding AG, an investor in MFIs, and Impulse Microfinance Investment Fund, a fund managed by Incofin Invesment Management [3,4,5].

by Stefanie Rubin -

MICROCAPITAL BRIEF: Expert Points to Need for Microinsurance in Nigeria as Insurance Penetration Rate Worsens

According to the Managing Director of Insurance Brokers of Nigeria, Mr Prosper Okpue, the insurance penetration rate of Nigeria continues to worsen. His statement comes over a year after the World Bank issued a report citing that the Nigerian insurance industry had remained stagnant for 35 years and its world market share stood at a mere 0.01 percent (compared with South Africa’s 0.83%). The former president of the Nigerian Council of Registered Insurance Brokers attributed this to the fact that, “Only companies or government ministries will pay premium for their group life insurance. What happens to the informal sector where the bulk of the population can be found carrying out legitimate economic activities?” In response to the issue, Mr Okpue proposed a microinsurance scheme that would “help the people integrate insurance into their lives.” Further details have not been released.

by Hio Kyeng Lee -

MICROCAPITAL BRIEF: Central Bank Of Nigeria (CBN) Issues Guidelines On Operation Of The Microcredit Fund

The Central Bank of Nigeria (CBN) recently presented guidelines to state governments on how they may access the monies held by its Microcredit Fund. Established in 2008, the Microcredit Fund, a national government fund which was originally funded with contributions from state governments, holds NGN 50 billion (USD 333.94 million) and is ready to be operationalized. The Microcredit Fund represents the national government’s effort to securely distribute state monies in order to develop the microfinance sector. The general scheme implements several layers of bureaucracy in order to ensure a secure channel by which microenterprises may ultimately access monies from the Microcredit Fund and perhaps is a reflection of the recent turmoil in the nation’s microfinance sector.[2] State governments must first set up a separate account with a commercial bank which is intended to hold the monies received from the Microcredit Fund. The account is then used by state governments in partnership with local banks to disburse loans to microenterprises that fit within the parameters of the Microcredit Fund’s objectives. Once disbursed, it is the responsibility of state governments to establish a mechanism to monitor and supervise the repayment of the loans and, out of the repaid proceeds, pay back to the Microcredit Fund a percentage of the returns. These guidelines are meant to responsibly develop the microfinance sector and ensure compliance by state governments and commercial banks with existing microfinance regulations.

by Hio Kyeng Lee -

MICROCAPITAL BRIEF: Microfinance Banks Want In On Central Bank Of Nigeria’s Proposed Bailout Of Commercial Banks

Commentators are arguing that the Central Bank of Nigeria’s (CBN’s) proposed bank bailout program extend to distressed microfinance banks. The Central Bank of Nigeria is considering the establishment of an asset management company that would buy certain distressed loans from commercial banks at a discount with the goal of providing greater liquidity in the banking sector.  This program would not extend in its current iteration to microfinance banks because only loans with identifiable collateral are eligible.  Mr. Akin Oladeji, Managing Director of a local investment bank, opposes the call to bailout distressed microfinance banks because they operate in the informal sector and therefore are not fully integrated into Nigeria’s financial markets.  Rather, he states that a separate government agency should be created to supervise and provide assistance to ailing microfinance banks.

by Radhika Chandrasekhar -

MICROCAPITAL.ORG BRIEF: Lagos State Government in Nigeria Provides $2.3m to Lagos State Microfinance Institution (LASMI)

The state government of Lagos, Nigeria, has extended an equivalent of USD 2.3 million to the Lagos State Microfinance Institution (LASMI), in order to enable more low-income borrowers to obtain loans, according to Lagos State Governor Babatunde Fashola. These funds are to be disbursed by eight microfinance institutions that are registered under LASMI. Fashola stated that the Lagos state government contributed about USD 1.2 million, while the partnering MFIs under LASMI matched that amount by also providing a sum of about USD 1.2 million.

by Hio Kyeng Lee -

MICROCAPITAL.ORG BRIEF: Nigerian Microfinance Banks Pledge to Form Single Organization in Response to Supervision Crisis

Two Nigerian microfinance trade associations, the National Association of Microfinance Banks (NAMFBIN) and Association of Microfinance Bank in Nigeria (AMBN), have pledged to form the single organization titled, the National Association of Microfinance Banks (NAMB).  Under the supervision of the Central Bank of Nigeria (CBN), NAMB would become the only authorized organization to represent microfinance institutions.  Currently, Nigerian regulators have been overwelmed by the large number of microfinance institutions operating in the country and the microfinance banking industry has been in turmoil. By forming a single microfinance trade association, the hope is to promote greater adherence by members to a common set of business practices and to lessen the regulatory burden on the state thereby restoring confidence in the industry as a whole.

by Radhika Chandrasekhar -

MICROCAPITAL.ORG BRIEF: Access Bank Plc. and State of Anambra, Nigeria Launch $16.5m Microfinance Scheme

Access Bank Plc, a Nigerian commercial bank, has agreed to work with the Anambra state government to launch the state’s first microfinance scheme, by providing an equivalent of USD 16.5 million to selected microfinance institutions (MFIs) within the month. State Governor Peter Obi plans to set up workshops at the local government level throughout the state, in order to monitor progress and train operatives on “effective operation of the scheme.” He has also organized a committee, consisting of himself, representatives of the Access Bank, the Central Bank of Nigeria, microfinance bank operators, and others, who will oversee the program. The criteria for taking out a loan are not based on assets or collateral, but on “proven good character of the borrower.” The MFIs receiving funds are restricting the maximum amount that can be loaned to an individual to be equivalent to USD 3,294.

by Radhika Chandrasekhar -

MICROCAPITAL.ORG STORY: The Nigeria Deposit Insurance Corporation (NDIC) “Overwhelmed” by Microfinance Responsibilities

A recent article from Next.com, [1] an online source for Nigerian news, reported that the Nigeria Deposit Insurance Corporation (NDIC), the financial industry regulator and subsidiary of the Central Bank of Nigeria (CBN), is unable to regulate and keep up with the rapidly expanding microfinance sector in the country. [2] At a workshop for finance correspondents in Kaduna, Nigeria, [2] [4] Jacob Afolabi, a deputy director at the NDIC, stated that the NDIC and the CBN are “overwhelmed by the number of microfinance banks in the country.” [2]

by Diya Chopra -

MICROCAPITAL.ORG STORY: Central Bank of Nigeria (CBN) Considering Outsourcing the Supervision of Microfinance Banks (MFBs)

Central Bank of Nigeria (CBN) governor, Mallam Lamido Sanusi, said recently, while speaking in a meeting at corporate headquarters, that the supervision of the 800+ microfinance banks (MFBs) in Nigeria may be outsourced.

by Christopher Maggio -

MICROCAPITAL.ORG STORY: ‘Fidelity Plc’ of Nigeria to Offer Banking Service Including Check Clearing to ‘Support Microfinance Bank’

According to Marcel Mbamalu of the Guardian in Nigeria, Support Microfinance Bank, a microfinance institution in Nigeria, has entered a “strategic and clearing partnership” with Fidelity Bank Plc, a major universal bank (capable of banking and investment activities) in Nigeria [1,2,3]. Customers of Support Microfinance Bank will now be able to receive banking services, including the clearing of checks, from all 140 branches of Fidelity Bank Plc [1].

by Christopher Maggio -

MICROFINANCE PAPER WRAP-UP: Strategies for Effective Loan Delivery to Small-Scale Enterprises in Rural Nigeria, by Benjamin Okpukpara

Written by Benjamin Okpukpara, published in the Journal of Development and Agricultural Economics Vol. 1(2), pp. 041-048, May, 2009, housed at Academic Journals.org, 8 pages, available at:
http://www.academicjournals.org/JDAE/PDF/Pdf2009/May/Okpukpara.pdf

This work studies the determinants of micro business loan acquisition for rural entrepreneurs in Nigeria. In Nigeria, only 35 percent of the “economically active” population has access to formal credit [1]. In order to increase access to formal credit to rural areas, the government has enacted various microcredit programs specifically targeting the rural poor. However, according to the author, most of these programs have fallen short of their goals due to “poor targeting” and a “lack of organized ways of administering loan to the rural enterprises” [2,4]. Therefore, this study attempts to ascertain which strategies can overcome the problem of low access to microfinance services.

by Stefanie Rubin -

MICROCAPITAL.ORG STORY: Nigerian MFI, Integrated Micro Finance Bank Plc (IMFB), Temporarily Closes Doors Due to Lack of Liquidity

The Central Bank of Nigeria (CBN) has granted permission to Integrated Micro Finance Bank Plc (IMFB) to temporarily shut its doors due to a lack of short-term liquidity [1].  The announcement comes shortly after the unexpected resignation of IMFB Chief Executive, Mr. Simon Akinteye.  According to Mr. Femi Fabamwo, Deputy Director of the Other Financial Institutions Department of the CBN, the short-term liquidity problems of IMFB were intensified when huge numbers of enraged customers demanded their money back.  Lacking sufficient financial resources to meet depositors´ requests, IMFB appealed to the CBN, which has allowed it until next month to reopen.