Nigeria Microfinance: Most MFIs lack technical capacity

A venture capitalist and investment management advisor, Alitheia Goodwell Microfinance Bank, a subsidiary of Alitheia Capital, in order to improve the performance of Nigerian microfinance institutions, MFIs, is advocating for the importation of technical capacity so as to make the sector more appealing and also attract increased foreign donor grants.

This is sequel to the Central Bank of Nigeria’s listing of poor corporate governance and weak internal control as some of the challenges impeding the performance and subsequent impact of MFIs in Nigeria.

Mr. Andre Wenger, Vice President, Alitheia Capital, said with its vast experiences from microfinancing in India, Alitheia Goodwell MFB can help MFBs become more efficient so that they can grow faster and reach more people with their products and presence.

“In international comparison, Nigerian MFIs are very much under-performing and according to our emerging reports on microfinance banks in West Africa, we discovered that some MFBs have a portfolio average of 7.2 per cent compared to 1.7 per cent in Asia. We are talking about nearly 8 per cent of loans being at risk in the hands of people and that is huge for only a section of MFIs.”

Continuing, Andre Wenger said “A lot of technical capacity needs to be imported, especially from the Indian experience, since their microfinance market developed differently from ours. What is closer to our experiences and our benchmark is the performance of microfinance institutions in Latin America because it developed from individual loan basis. This is what we have in the Nigerian scene where the MFBs are playing a big role in financing individuals and not groups like is obtainable in Asia.”

Wenger said improved performance of MFIs can attract additional foreign grants since there is very little donor attention in the Nigerian market when compared to other countries.
He pointed Ford Foundation and the World Bank as some international organizations that have spotted some MFIs, but generally, most MFBs that are really looking to bring capacity have very little leeway in financing.

“The quality of technical assistance that is available to Nigerian MFIs is not vibrant. I would like to see more support for the industry and Nigeria. Currently, it is very much commercially mainstream consultancy. Microfinancing is a specialized industry that requires specialized focus.”

The Vice President of Alitheia Capital pointed out that another area in which Alitheia Goodwell MFB can assist MFIs perform better is on a structural level.

“This can be achieved by helping change the existing regulations that limit the MFIs as we want to play a big and significant role in giving the industry the structure it needs to grow faster- either through the apex bank or microfinance associations- by helping to give real value to the market.”

Source: VANGUARD | Amaka Agwuegbo | 20 Jul 2009