Umuchinemere Procredit
Microfinance Bank Nigeria Limited

Microfinance institutions in Nigeria are bemoaning the current economic recession and the lingering unstable or unpredictable foreign exchange trend in the country as a great danger and huge obstacle to growth and sustenance of micro, small and medium enterprises in the country, calling on the Federal government to quickly introduce measures that will remove the wedge and allow free growth of micro, small and medium scale businesses.

The microfinance banks see the Forex unpredictable trend as hindering operators of micro and small scale businesses from approaching the microfinance institutions for access to funds to do or sustain their businesses, thus adversely affecting the performance of the microfinance banks in Nigeria.

Chairman of the National Association of Microfinance Banks (NAMB) Enugu State chapter and Managing Director of Umuchinemere Pro-credit Micro Finance Bank (UPMFB) Enugu, Mrs. Nnenna Maria Ekete, made the lamentation in Enugu, shortly after a preparatory meeting at her office for a larger meeting of the southeast zone of the association.

She said that one major negative impact of the economic recession and the unstable or unpredictable Foreign exchange regime on micro, small and medium scale businesses now was such that operators and prospective operators in this sector of the economy hardly approach the microfinance banks to access available funds meant for their businesses, out of the fear of possible consequences of obtaining credit facilities and not being able to repay later under the present economic recession and unpredictable forex trend, thus hampering the growth and sustenance of micro, small and medium enterprises in the country.

The UPMFB Managing Director said that the multiplier negative impact of the bad economic situation and the lingering of the unstable forex regime could be observed for instance in the substantial shortfall in the amount of funds' disbursements recorded by many microfinance institutions in the first quarter of the year, as against what was the experience in the immediate financial year and the target in the first quarter of the current year.

Mrs. Ekete cited example that in the first quarter of 2016 her bank, Umuchinemere Pro-credit Micro Finance Bank, disbursed a total micro credit fund of ₦247,719,959 to active poor people for their micro and small scale businesses, but in the first quarter of 2017 the bank could only disburse a total micro credit fund of ₦216, 604, 700, a shortfall of ₦31,115,259 from that of the previous year and ₦44m below the total of ₦260m which the microfinance institution had projected to disburse to the micro and small business sector of the economy in the first quarter of the current year 2017.

According to her, it was the recession and the unpredictable trend of the foreign exchange performance that were responsible for the drop in disbursement because the real core customers were scared of borrowing to do business and at the end not making any gain and being unable to repay the borrowed funds, a development that is now compelling microfinance banks to develop other products, such as engaging in permissible investments and other businesses, so as to remain in business and shield themselves from becoming distress.

The NAMB officer noted that the danger of the recession and particularly the unpredictable foreign exchange trend that have been with the country for some time now was such that the micro and small scale entrepreneurs are not keen again in coming up to take funds for their businesses because of the fear that after borrowing to invest in their businesses that prices of commodities could crash or rise because of the fluctuating trend of forex rate, possibly resulting in their loss of money and being unable to repay the funds they obtained, therefore preferring not to come and take funds to invest in their businesses but rather preferring to watch and wait when the situation would improve, an inimical development Ekete explained as not only restraining micro and small entrepreneurs' easy access to funds and inhibiting growth of the micro and small enterprises sector but as also injurious to the health or performance of microfinance institutions in the country.

The Umuchinemere Pro-credit Micro Finance Bank's head of Credit, Mr. Charles Udeani, shared the same opinion with the bank's Managing Director, explaining that "The lingering economic recession in the country still affects businesses adversely, and the uncertainty in the business sector ultimately affects lending."

Udeani observed that even the slight gains made by the naira against the dollar towards the end of the first quarter of the year was yet to reflect or have any significant impact on the prices of commodities.

The Manager Credit said that out of the total of ₦216.6million his bank was able to lend in the first quarter of the current year, the female gender got a total of ₦156,784,700.

Mrs. Ekete however implored the government to introduce some intervention projects that will help micro, small and medium businesses get out of their present quagmire by helping people have easy access to funds at a very little and subsidized interest rate through the microfinance institutions, for various types of micro and small scale businesses, especially to farmers, and to also bear the responsibility of educating them on how to access the funds, so as to reduce the cost of the administration of the funds from the microfinance banks.

The bank executive advocated for a reasonable moratorium period for repayment of the funds, while those them that use foreign exchange to do their businesses should be allowed easy access to forex.

Signed

Sir Abuchi Anueyiagu,

Head Public/Media Relations Unit, UPMFB,