21st March, 2011
Chairman, Lagos State Micro Finance Institution (LASMI), Bashorun Sikiru Alabi-Macfoy has said that micro finance banks are key to eradicating poverty in the society.
Alabi-Macfoy spoke at a special workshop and awareness programme the theme, The Role of a Micro Finance Bank in a Developing Economy organised by Ojokoro Micro-Finance Bank Plc, at the weekend.
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.
â€œThere are so many petty traders that need N10,000 or N20,000 to do their business and most of them are bread winners and so, if we can encourage them, the better. Some use N5,000 to buy â€˜pure waterâ€™ and they have the capacity to sell N20,000, so if the micro finance bank can give them a loan of N20,000, they will be able to make more money,â€ 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 could have the means to lend out some money to grassroots people at 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 grown from a concept to a movement.
â€œNowadays, 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 and poverty alleviation in developing economies.
â€œMicro 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,â€ she noted.
According to her, the reason for this was that majority of people in developing economies were poor and 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 MFB had helped to bridge the gap.
Speaking on the topic The Role of a Micro-Finance Bank in a Developing Economy, Adesina urged MFBs to possess some financial qualities and means of real banks, noting that in the past, many MFBs which collapsed left many of their customers in penury and debts.
â€œI will therefore urge that sound financial regulations and risk management rules must be practised and adhered to at all times by the management of micro finance banks. The intervention of the Central Bank of Nigeria recently along these lines that I have suggested, to stabilise 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.
â€œMicro finance banks must subscribe to a code of ethics in the conduct of their operations. They are the bank of a large segment of the population whose energy will be disruptive of the entire system if it is untapped for the common good.
â€œThrough micro financing, it will be able to bring the people from the poverty net into a modern economy that is competitive, produces for consumers with purchasing power and who will be able to acquire property as a right and collateral for other transactions,â€ she added.
Chairman, Ojokoro Micro Finance Bank, Dr. Adebayo Oyeyemi, said the vision of the bank remained a pace setter in micro finance banks in the state, saying that the capital base of the bank had moved from N250,000 when it was established to a current capital base of N105.5 million.
â€œBetween 1996 and 1997, we raised our share capital to N3.25 million and between 1998 and 2006, we moved up to N43 million which is more than the N30 million capital base the CBN slated for micro finance banks.
â€œIf we could move from N250,000 to N3.25 million and to N43 million and then N105.5 million, we could reach our target of N1 billion capital base. Our basic secrets are management strategy, focus, service, competent, self-discipline, creativity and innovation,â€ he stressed.