Microfinance Bank Loan Defaulters May Be Jailed
- By Saka Khaliq
- Published April 27th, 2011
- News
- Unrated
THE National Association of Microfinance Banks (Namb), on behalf of MFBs nationwide, is partnering the Central Bank of Nigeria (CBN) to criminalise loan defaults in the microfinance industry, BusinessWorld Intelligence can now reveal.
Facts emerged last week that Namb had approached the apex bank with a proposal to prosecute and criminalise defaulters across microfinance banks in the country.
Investigations reveal that the CBN has accepted the request of the association and is making plans to forward the proposal to National Assembly for consideration.
An industry source said, “The laws that guide lending in Nigeria do not favour MFBs. To this end, we are proposing to the National Assembly through the CBN so that defaults of loans could be criminalised, hence reduce defaults.”
Investigations show that about 103 microfinance banks had their licences withdrawn last year because they were financially weak.
This financial weakness was traceable to loan defaults, as debtors refused to repay their loans. While many of the debtors fled their homes, thus, unable to be traced, others gave series of excuses for their defaults.
Checks around MFBs show that operators are facing hard times to recover some of the unpaid loans, saying the law does not favour MFBs.
To this end, most MFBs had reduced loan grants this year, to guard against risk. If the proposal is accepted by the house, microfinance institutions will be able to prosecute defaulters as expected, while heavy sanctions await defaulting customers.
Mr Olufemi Babajide, chairman, National Association of Microfinance Banks (Namb), Lagos chapter, confirmed that the body has approached CBN on the matter.
Facts emerged last week that Namb had approached the apex bank with a proposal to prosecute and criminalise defaulters across microfinance banks in the country.
Investigations reveal that the CBN has accepted the request of the association and is making plans to forward the proposal to National Assembly for consideration.
An industry source said, “The laws that guide lending in Nigeria do not favour MFBs. To this end, we are proposing to the National Assembly through the CBN so that defaults of loans could be criminalised, hence reduce defaults.”
Investigations show that about 103 microfinance banks had their licences withdrawn last year because they were financially weak.
This financial weakness was traceable to loan defaults, as debtors refused to repay their loans. While many of the debtors fled their homes, thus, unable to be traced, others gave series of excuses for their defaults.
Checks around MFBs show that operators are facing hard times to recover some of the unpaid loans, saying the law does not favour MFBs.
To this end, most MFBs had reduced loan grants this year, to guard against risk. If the proposal is accepted by the house, microfinance institutions will be able to prosecute defaulters as expected, while heavy sanctions await defaulting customers.
Mr Olufemi Babajide, chairman, National Association of Microfinance Banks (Namb), Lagos chapter, confirmed that the body has approached CBN on the matter.
