Many people in Nigeria still lack access to financial services. These services include loans, consultations, financial reliefs, and business capital. Many women and dependent children live below $1 daily. Conventional banks often ignore these financially excluded individuals. Sadly, these people represent over 60% of Nigeria’s population.
Nigeria needs financial inclusion to strengthen its growing economy. Roadside mechanics, shoemakers, petty traders, and pepper sellers all contribute to economic growth daily. Despite high financial exclusion rates, Nigeria still maintains one of Africa’s fastest-growing economies.
Over the years, more women have become breadwinners in Nigerian homes. However, many of these women still lack access to proper financial services. This situation highlights the importance of microfinance banks in Nigeria.
Microfinance banks continue to reduce the gap between the rich and the poor. They provide loans, business capital, consultancy, and financial reliefs to underserved Nigerians. These banks mainly support people ignored by conventional financial institutions.
Every business and every job contributes to Nigeria’s economy, whether people recognize it or not. Microfinance banks therefore play important roles in shaping Nigeria’s economic future. They help poor individuals participate in the financial system.
Microfinance banks have also localized financial services across Nigeria. Funds now reach people who genuinely need financial support. While conventional banks focus mainly on wealthy Nigerians, microfinance banks support ordinary citizens and small business owners.
Many Nigerian women now access business loans through microfinance banks. These loans help them build businesses and support their families. Most women repay these loans with manageable interest rates after several months.
Without microfinance banks, many Nigerians would remain financially stranded. These institutions continue to create opportunities for financially excluded individuals across the country.
History and Evolution of Microfinance Banks in Nigeria
There are currently five types of micro-finance banks identifiable in Nigeria. They are as follows:
1. Privately owned micro-finance banks.
2. Community micro-finance banks.
3. Government micro-finance banks.
4. Non-governmental organizations’ micro-finance banks.
These banks are completely different from the traditional or conventional Nigerian banks we are used to. These banks are focused on elevating poverty and providing financial services to the poor cum financially neglected.
Proscribed Acts of Microfinance Banks in Nigeria
The Central Bank of Nigeria (CBN) indicated in 2005 that there are some activities that are not expected of micro-finance banks. They are as follows:
1. Accepting deposits from the any public or government sector except in the events of paying gratuities, pensions, salaries, etc.
2. Micro-finance banks are not expected to meddle in foreign exchange transactions.
3. Cheque clearing activities.
4. Involving in real estate business except for accommodation purposes.
5. They are not to involving in renting, leasing, sales/purchase with any of her directors, employees, or any of their family members.
6. They are not to deal in international corporate finance.
7. International electronic funds transfer.
Benefits of Microfinance Banks in Nigeria
There are currently 902 registered micro-finance banks in Nigeria. However, only eight of them control more than 45% of the financial markets. The stipulated roles of micro-finance banks in Nigeria are as follows:
1. Micro-finance banks encourage people who are normally financially neglected in the society to save.
2. It provides credit facilities to the poor or needy who are economically active.
3. It creates job opportunities.
4. It creates an enabling environment for an economic plan even if incomes are stagnant.
5. By targeting women borrowers, loan repayment rates are increased.
6. Families who receive loans from micro-finance banks have a better chance for better education.
7. There is little risk with micro-finance banks.
8. Micro-finance banks make money available. Hence, interrupts generational poverty.
Challenges of Microfinance Banks in Nigeria
1. Just like many other institutions in Nigeria, micro-finance banks are battling with some recurring negative trends in the society. They are as follows:
2. Bad debts: most Nigerians do not pay back loans. Thus, most of these loans are written off as bad debts.
3. Credit Worthiness: most potential borrowers are not credit-worthy.
4. Inadequate investments.
5. Confusion on modeling.
6. Lack of financial education or awareness on services rendered by microfinance banks.
7. Over-dependence on conventional banks.
8. Many micro-finance banks in Nigeria are not well regulated.
Nigerian Women as Breadwinners: The Conclusion
There are a lot of sufficient reasons women are the darling of micro-finance banks in Nigeria. Credit-worthiness, high repayment potential and small scale economic involvement by Nigerian women are some of the reasons micro-finance banks in Nigeria lend more to them. But historically, Nigerian women have been known to be more emotionally intelligent, financially responsible, accountable and trustworthy. An average Nigerian woman actually cares for her family and for others. The qualities above are what is causing a watershed in Nigeria’s traditional societies. In the past, men were responsible for the upkeep of his family and even extended families but it is changing at a double-quick-march.
Female clients of micro-finance banks in Nigeria have been discovered to be breadwinners or potential breadwinners according to the African Development Review (ADR). When these banks grant loans to them, these loans are invested in their little businesses. Most times than not, the proceeds from their small scale business are used to cater for their families. This trend has the potential to increase in the no distant future. More than 40% of women in Nigeria are breadwinners and it is no surprise to put it mildly. We can only imagine how better it could get when more financial services are accorded their lots. The possibility is just limitless and mouthwatering.
