Evaluating BoI stimulus through microfinance banks

Recently, the Bank Of Industry (BoI) signed a N2 billion financial inclusion on bottom of the Pyramid (BoP) Scheme with three Microfinance Banks (MFBs) to ensure credit delivery to the underserved and under-banked micro-entrepreneurs.

 Taiwo Hassan examines the impact of the lending scheme

 

Bottom of the Pyramid (BoP) scheme

Currently, Nigeria’s economy is at a crossroad and in need of urgent surgical solution just as the three tiers of government appear to be doing their best to improve the welfare of the Nigerian masses.

Indeed, the country’s macro- economic situation has been pathetic based on its dismal performances as disclosed by the indices from the National Bureau of Statistics (NBS).

Despite the dire situation, one of the key sectors of the economy that is feeling the effect of the change is the Small and Medium scale Enterprises (SMEs), which falls within Bottom of the Pyramid band.

In an orderly business environment, the SMEs are the engine room or live wire of any country’s economy.

The reverse is, however, the case here in Nigeria due mainly to the inability of operators in the sector to access funds from financial institutions.

However, in order to change and fine tune activities in the sector, the BoI has been supporting operators in the industry with funding for sustainability.

MoU

In another move to consolidate this commitment, the BoI recently signed a N2 billion for the Bottom of the Pyramid (BoP) scheme with three microfinance banks, which include LAPO MFB, Fortis MFB and Lotus Capital.

The arrangement is to enable the three banks provide credit facilities to the under served and under banked micro-entrepreneurs in the country.

At the meeting with the MFBs, the bank explained that the partnership would bring the number of banks under the arrangement to 14, adding that the bank was currently in partnership with 11 MFBs under the BoP scheme. According to BoI, the sum of N1.1 billion had earlier been disbursed to MFBs for lending to micro- entrepreneurs.

Speaking while presenting cheques to the MFBs, Acting Managing Director, BoI, Waheed Olagunju, said that the bank also had approval valued at N1.13 billion for nine others banks.

He explained that the BoP scheme was essentially aimed at poverty reduction through job and wealth creation with focus on rural micro-enterprise operators and with a view to extending financial inclusion to under-served and under-banked micro-entrepreneurs in the country.

The BoI boss also noted that the scheme was designed to leverage on the spread and penetration of the participating financial institutions in all parts of the country to stimulate economic activity within the critical mass at the BoP.

“Project identification shall be on the basis of the comparative advantages of the various states of the federation, including the Federal Capital Territory (FCT). Activities to be financed include but are not limited to value addition in sectors like agriculture, manufacturing, food products (snacks, bakeries, etc), beverages, solid minerals, services, artisanal activities like wood and metal works, tailoring, shoe making etc.

“BoI’s BoP model is consistent with the operating models of some of the world’s best development finance institutions that deliver their services indirectly through intermediary retail finance that has extensive branch network. “For instance, BNDES of Brazil is the only DFI in that country.

It is the most impactful DFI in the world in terms of customer base. As at 2015, they had more than one million customers.

They were able to achieve this through their product called BNDES Card under which they lend through commercial banks,” he said.

Olagunju, however, stressed that it was BoI’s desire to ensure that the MFB beneficiaries and other financial institutions in all parts of the federation benefited from the BoP scheme through an aggressive marketing drive and sensitisation campaign.

He added that this would give further impetus to Federal Government’s job and wealth creation plan.

MFBs’ reaction

Speaking at the event, the Managing Director, Lotus Capital, Hajara Adeola, said that the MFBs would work assiduously to achieve the objective on the BoP scheme. According to her, the process of selection for the MFBs was rigorous for the banks before approval for the financial inclusion scheme.

She explained that the fund would be spread to the target group across the country through their various branch networks.

She commended the management team of BoI for taking them through a rigorous managerial process to qualify for the financial inclusion scheme.

“I am very delighted to be part of this programme because we align completely with BoI’s objective particularly on financial inclusion penetration and I suppose the reason we are part of this group is based on our track records on financial inclusion in the country,” she noted.

Conclusion

For industry watchers, it is expected that the N2 billion given to the three MFBs would be used judiciously to lift the targeted Nigerians out of poverty. – New Telegraph.

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