FINANCIAL INCLUSION AND THE GROWTH OF MICRO FINANCE BANKS IN NIGERIA

Abstract

Enhancing Financial Innovation and Access (2014) report 40% of Nigeria’s adult population is financially excluded. Much of this proportion includes the poor and the financially weak living in the rural areas and the urban fringes. The Micro Finance policy of the Nigerian government was intended to convert existing community banks that meet certain criteria into microfinance banks (MFBs), so as to offer services that appeal to the financially excluded adult Nigerians and bring them into the mainstream financial system. The performance of MFBs between 2007 and 2011 appears to suggest that progress is being made. The assets and liabilities of the MFBs had rose to N190.7 billion from just N55.1 billion in 2006. The loans and advances given by MFBs also increased from a mere N16.0 billion in 2006 to over N67.6 billion at end-December 2011. Moreover, the asset base of MFBs has been projected to 120 billion by the year 2010. MFBs could have done more but for a myriad of challenges that affect their operations such as poor risk management processes, dearth of infrastructure, high cost of operations, among others. It is on this premise that the paper suggest that the government should do more to create an enabling environment that will enable MFBs to thrive and grow; employment of qualified staff who are sufficiently motivated; and regular staff training to expose staff to strategies that are critical to micro financing, etc.