The microfinance banking sector of the economy is set to witness a major boost as operators in the industry have floated a company known as the Microfinance Development Company Limited (MDCL), to address the problem of lack of wholesale funds for the sector.
The MDCL is an initiative of the National Association of Microfinance Banks (NAMB), aimed at creating an institutional platform that can access borrowed and special intervention funds for the sector.
Speaking on the development, the President of NAMB, who is the Chairman of MDCL, Mr. Rogers Nwoke, said the microfinance sub-sector was built to survive on wholesale funding to be provided by the Central Bank of Nigeria (CBN). But he pointed out that for nine years, the sector operated without the needed whole funding to support lending and refinancing activities.
“Nine years later, the N220 billion Micro Small and Medium Enterprises Development Fund (MSMEDF) 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 access to 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 at addressing the funding gaps of the subsector.
“With an authorised share capital of million 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, adding that even some deposit money banks (DMBs), including those listed on the Nigerian Stock Exchange, were experiencing difficulty, “and there is the general market perception that MfBs are more risky than the DMBs, putting 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 added.
Speaking in the same vein, the Managing Director/Chief Executive Officer of MDCL, Mr. Obinna Onunkwo, said the company would easily connect global and local financiers with microfinance banks (MfBs), strategically, strategically position MfBs to reach a wider market, provide financial and technical supports to MfBs, drive competitive and affordable interest rates by MfBs, have a risk management system that will sustain the sub-sector infrastructure as well as control risks at all times and work in collaboration with regulatory bodies to develop the sub-sector.
Onunkwo, who is also the MD/CEO of Purplemoney Microfinance Bank Limited, explained that large number of the microfinance banks in operation in Nigeria lacked the capacity on their own to either access existing non-equity funds or even attract donors, considering their operational antecedents and performance, quality of their financials, other non-financial attributes and critical metrics that investors, lenders and development partners consider before injecting funds into MfBs.
“As such, only the big, well-structured players have succeeded in attracting funds other than equity to boost their operations. MDCL will bridge this capacity gap,” he said.
The MD/CEO, noted that the company has put in place a strong board and management team that will ensure it achieves its objectives. Apart from Nwoke and Onunkwo, who are chairman and MD/CEO respectively, the other directors are: Dr. Dan Ogun(in charge of legal/company secretary);Mrs. Winifred Oche(financial controller); Dr. Godwin Ehigiamosoe of LAPO Microfinance Bank Limited; Mr. Goke Adegbami; Caleb Shikir; Chief Leo Okoye; Mrs. Bimpe Ogunleye and Dr. Biodun Adedipe(independent director).