Jola-michael Samson. T : Financial Inclusionist.
Provision of loans is what most people know about microfinance; it is also the provision of payments services to the low-income earner. Microfinance Bank was established by the Central Bank of Nigeria (CBN) to provide these services in order to alleviate poverty.
It is evident that this goal has not yet been achieved and the probability of achieving the set target soon in this regard through Microfinance Banks (MFBs) remain unlikely.
The Central Bank of Nigeria (CBN) has been sensitive and proactive enough to detect this early and brought the Fintech into the picture to facilitate the achievement of this goal. Unfortunately, most MFBs perceived the Fintech as competitor and not facilitator so to speak. Also, the Central Bank of Nigeria (CBN) had earlier introduced Agency Banking which is effectively driven by Technology but not many Microfinance Banks are looking at the direction.
A Fintech Company still need Banks to drive its business effectively directly or indirectly based on the present structure in Nigeria.
Without deceiving ourselves, a Fintech company in a location can be everywhere in the country through technology, Fintech companies are not restricted geographically the way Microfinance Bank is categorized to Unit, state and National; and they facilitate same services MFBs are popularly known for and even more in simpler procedures regardless of the locations of the prospects.
Most Microfinance Banks still operate with loan forms of 6-10 or more pages in this age. Most of them still believe they must always be physically present to avoid bad loans.
The approach employed by Fintech companies will spread quickly and definitely the people in the village where a Microfinance Bank is physically located will soon be lending from Fintech Companies in the city via the telephone. We may think it will be complex for the petty traders to adopt and understand the Fintech processes but we ignore the fact that the procedures will get even simpler with time; for instance, to borrow call credit from Telecom companies, we make use of USSD codes and repay in the next recharge, same processes may be adopted for smaller loans. We already have some Fintech companies selling these products and services conveniently.
The wisest approach for Microfinance Banks in my opinion is to strategically partner with reliable Fintech companies to drive their products and services through technology for wider outreach, sustainability and relevance. Fintech Companies had begun partnership with Commercial Banks while some Banks are setting up theirs; the trend will continue. Many MFBs may fizzle out completely if the call is ignored.
Few players in the sub-sector will meet up with the 2021 deadline set for the compliance with new recapitalization requirement by Central Bank of Nigeria.
The earlier the better for Microfinance Banks in Nigeria.
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