Head of Recovery, Bosak Microfinance Bank Limited, Mr. Charles Onwuchekwa, in this interview said that the proposed increase in the capital base of MFBs is overdue and will enhance public confidence in the MFB segment.
Excerpt:
By Providence Emmanuel
WHAT is the sub sector doing differently compared to what it used to be?
Things are looking good for microfinance banking. The citizens are beginning to accept microfinance banking as a way out of financial crunch. As I speak, a number of commercial banks are not giving out loan while the Microfinance Banks, MfBs, are doing so. In a way, microfinance is helping the economy. A number of people are being given money to grow their businesses on a daily basis, only microfinance banks are giving them loan but the commercial banks are not giving.
How would you assess CBN’s plan to raise capital requirement for MfBs?
I don’t think the CBN is asking too much. It is a way to consolidate. So the MfBs must up their game and beef up their capital base so as not to erode confidence. Most of the Unit MfBs have been operating with N20 million for a long time and so the CBN does not want that to continue. They have been given enough time to shore up capital to ensure confidence is built among the populace. I don’t see it as something that is not doable. It is doable and it only boils down to boosting the economy.
Do you see consolidation as building confidence or eroding confidence?
We have more Unit MfBs than the State and National MfBs. The reason is because of the capital requirement. The capital requirement for the Unit category is N20 million while National is N200 million. N200 million is not easy to come by. It is good we have quite a number of Unit MfBs. Asking Unit MfBs to shore up capital means that they want to bring in more people into the board so that the ownership would be expanded.
Why do you think people collect loans and do not pay back?
It is an age long issue, most businesses in Nigeria are closing shops and they must have gotten money for the business from somewhere to do the business. Government policies are affecting a lot of businesses in this country and when businesses are crumbling, the resultant effect is that borrowers may not have capacity to pay. But what most MfBs are doing is that they look into the collateral, there is something we call the five C’s of credit. They look at the character, capability and other things.
Do you think the collateral registry would help to assuage loan default?
It would go a long way and it is a welcome development. Most MfBs have been asked to register for the collateral registry. What is happening is that you will see customer using a particular property to obtain loan in so many banks but with this collateral registry, it would no longer be so. Going forward, if a particular property has been registered, it cannot be used again to obtain loan.
Are Nigerian MfBs embracing the collateral registry?
There is already a policy on that and they have been given a deadline, to follow suit. I can tell you that there have been seminars in respect to that. It is just a question of time and you would see that MfBs would start falling in line.
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