THERE are strong indications that majority of microfinance banks in the country are taking frantic steps to reduce credit facilities to customers in an effort to discourage poor application of credits.
Operators who spoke to BusinessWorld said the move was to meet the Christmas demand. Microfinance banks in Lagos, Ogun, Abuja and some eastern parts of the country have either stopped granting loans or reduced their credit facilities.
This, it was learnt, was to guard against diversion of funds as experienced in previous years. Investigations have shown over the years that microfinance customers constantly divert credit facilities granted during this period, to meet their festive needs and as such, are unable to repay.
This had affected microfinance banks in the past and led to illiquidity last year, which pushed few banks out of business.
Speaking to BusinessWorld, Mr. Moses Ajao, managing director, Glory Microfinance Bank said that his bank has reduced credit facilities to customers. He said “for Christmas and New Year, we have reduced lending to some of our customers because they can travel to their different states with the money.” Ajao noted that if at all there is the need for the bank to grant loan, such loan-seekers must have at least six months rent in advance,. This is a guarantee that he would not relocate. He revealed that some loan beneficiaries relocate to different areas after Christmas and New Year celebrations so that they would not be reached.
However, Mr. Kashiim Olanrewaju, managing director, Afribank Microfinance Bank while speaking with BusinessWorld in Lagos last week advised his colleagues to be extra careful during this yuletide period.