More Microfinance Houses Close Shops
- By Saka Khaliq
- Published May 17th, 2010
- News
- Unrated
AT least 60 per cent of 221 microfinance institutions in Lagos State have partially closed shop for business, BusinessWorld Intelligence can now reveal. This is sequel to the unfriendly business atmosphere in microfinance market, as they were unable to mobilise savings in the grassroots, while loans recovery rate is low.
Investigations show that microfinance banks are no longer getting new customers, and as such, the old customers are closing their accounts on daily basis. The twist of the event may not be unconnected with the public perception about microfinance banks, especially with over 10 firms that have already collapsed in Lagos State. This, it was gathered, created fears in the minds of microfinance clients, and most of them therefore cut relationship with their banks.
A visit to some of these MFBs revealed the number of withdrawals is on the increase, and only few come to save. Insider source disclosed that banks had partially stopped granting of credit facilities, while those who are still granting facilities are doing so at exorbitant interest rate.
However, the loan recovery teams of MFBs are finding it hard to recover the unpaid loans from debtors, as they cited harsh economic weather as reason why they could not pay.
With the deposit mobilisation said to have reduced by 60 per cent, banks are on aggressive loan recoveries to at least remain viable in business.
Most microfinance firms in Lagos State visited last week confirmed that since deposits are not forthcoming as usual, they need to at least recover their loans. Marketers, also known as ‘deposit canvassers’, saidt mobilisation of deposits is no longer easy like before, thus, unable to meet their monthly targets.
Meanwhile, microfinance firms are now using security operatives to arrest and prosecute the debtors, so that they could repay.
In case a debtor could not be located, it was gathered that the guarantor of such customer is arrested until he or she provide the debtor he/she guarantees. Through this, operators said they have been able to recover some of their loans.
Mr. Sola Odeyemi, managing director, First Choice MFB, said the illiquidity in the sector has ultimately led to the closure of about 10 microfinance institutions in Lagos State in the last few weeks. Some of the collapsed one include KFC MFB, Unique MFB, New Height MFB, , Almond MFB(Fake), PS MFB(Fake) and Milestone MFB. Others are Bristol MFB, Impact MFB, Kings MFB, Green Pastures MFB, Best Link MFB (Benin City) and Mustard Seed MFB.
Mismanagement of depositors’ fund, over-ambitions, lack of skilled personnel, indiscriminate distribution of credit facilities, lack of good corporate governance, embezzlement of fund, lack of vision, among others, were said to be responsible for their closure.
Investigations show that microfinance banks are no longer getting new customers, and as such, the old customers are closing their accounts on daily basis. The twist of the event may not be unconnected with the public perception about microfinance banks, especially with over 10 firms that have already collapsed in Lagos State. This, it was gathered, created fears in the minds of microfinance clients, and most of them therefore cut relationship with their banks.
A visit to some of these MFBs revealed the number of withdrawals is on the increase, and only few come to save. Insider source disclosed that banks had partially stopped granting of credit facilities, while those who are still granting facilities are doing so at exorbitant interest rate.
However, the loan recovery teams of MFBs are finding it hard to recover the unpaid loans from debtors, as they cited harsh economic weather as reason why they could not pay.
With the deposit mobilisation said to have reduced by 60 per cent, banks are on aggressive loan recoveries to at least remain viable in business.
Most microfinance firms in Lagos State visited last week confirmed that since deposits are not forthcoming as usual, they need to at least recover their loans. Marketers, also known as ‘deposit canvassers’, saidt mobilisation of deposits is no longer easy like before, thus, unable to meet their monthly targets.
Meanwhile, microfinance firms are now using security operatives to arrest and prosecute the debtors, so that they could repay.
In case a debtor could not be located, it was gathered that the guarantor of such customer is arrested until he or she provide the debtor he/she guarantees. Through this, operators said they have been able to recover some of their loans.
Mr. Sola Odeyemi, managing director, First Choice MFB, said the illiquidity in the sector has ultimately led to the closure of about 10 microfinance institutions in Lagos State in the last few weeks. Some of the collapsed one include KFC MFB, Unique MFB, New Height MFB, , Almond MFB(Fake), PS MFB(Fake) and Milestone MFB. Others are Bristol MFB, Impact MFB, Kings MFB, Green Pastures MFB, Best Link MFB (Benin City) and Mustard Seed MFB.
Mismanagement of depositors’ fund, over-ambitions, lack of skilled personnel, indiscriminate distribution of credit facilities, lack of good corporate governance, embezzlement of fund, lack of vision, among others, were said to be responsible for their closure.
