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  • Business - Banking & Finance
  • Updated: July 24, 2020

How Nigerian Microfinance Banks Have Tweaked Loans, Credit Facilities During COVID-19

How Nigerian Microfinance Banks Have Tweaked Loans, Credit F

 

The Coronavirus (COVID-19) pandemic has been a disruptive force that has changed the way businesses operate, patronage level, and consumer behaviours.

Microfinance Banks (MFBs) - the institutions at the heart of poverty alleviation programmes and developmental efforts - are implementing an operational response strategy to protect customers during the crisis.

Priorities have been placed on ensuring that clients have safe access to their accounts and these banks have also developed a policy on how to sustain their loans and credit facilities in order to help ease the burden that many Nigerians are currently facing during the pandemic.

In April, during the total lockdown in key Nigerian states: Lagos and Ogun plus the Federal Capital Territory (FCT), Rogers Nwoke, president, National Association of Microfinance Banks (NAMB), estimated a N42 billion loan loss for MFBs. This, according to BusinessDay.

Like all and sundry, Microfinance Banks' income threatened

"There is a threat to income as revenues thin out against existing very high costs," Nwoke said at the time.

"Clearly, there will be capital erosion due to losses occasioned by a very high portfolio at risk."

The board of trustees of the NAMB in March drew the attention of the regulator(s) to the fact that micro-entrepreneurs and small businesses would be most affected in the COVID-19 hard times given that the active poor and most vulnerable persons in the economy were found in this sub-sector.

With the microfinance sub-sector battling survival and sustainability, this reporter reached out to stakeholders in the industry.

Abdul Wahab Yusuf is the Managing-Director of Kisi Microfinance Bank (KMFB), Oyo state. Kisi town is labelled the 'Food Basket of Oyo State' due to its rich food production.

Yusuf says most of its financial intermediation scheme are under-performing. He adds that more than ever, they are now being 'selective' in giving out loans to customers.

“We are not earning income like before again," Yusuf, a trained accountant lamented while speaking to this reporter exclusively.

“Secondly, most of the facilities we put out are not performing because of the varying degrees of lockdowns, bans on large gatherings, curfews, and border closures. I mean the loans and advances.

“Many of our customers were not able to go out. Their shops were under lock.

“So, we were seriously hit."

Like the Federal Government of Nigeria, a three-month repayment moratorium for all loans is now being implemented.

“We had to extend their time by another six months  - which is 180 days.

“We grant six months because we are independent,” Yusuf said.

Abdul Wahab Yusuf, MD KMFB

He continued: “We experienced a low turnout of customers because of this COVID-19.

“Our income also reduced drastically by over 80%.”

Will customers still be granted loans?

“We are being careful this period. Those in the health line, food, farming are being considered - those regarded essential.

“We are not answering those in 'general trading' because there is no real business and total movement in the first place.

“We don’t want them to cause us huge loss.”

The impact of COVID-19 on the operation of MFBs is undoubtedly a snag.

Amolegbe Sakiru Oladele is a Loan Officer with a top Microfinance Bank in Nigeria.

He is invariably on the field and deals directly with small business owners.

Oladele says fresh loan seekers will most likely not be considered by MFBs at this time.

“We are still giving out loans, but majorly to the existing clients - not new clients," Oladele told this reporter.

“If you are coming for the first time to apply for a loan, they won't give you.

“And they are giving out loan to selected businesses.

“Businesses like schools, gym centres, beer parlours are exempted for now.

“In essence, we don’t give loans to businesses that are not opening.

"We only grant loans to businesses that are open and mostly our company’s existing and trusted clients.”

There are 913 MFBs across Nigeria that serve the low-income earners in the society, and with no end in sight to the pandemic, rural dwellers that seek empowerment might have to exercise patience if they do not fall into the category of 'essential service providers'.

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