Policy Challenges for Micro Finance Design and Practice in Nigeria

This document comprises three papers: PAPER 1: Titled: Challenges of Micro finance Supply and Administration. The author have attempted to provide background information on micro finance in this paper and the examination of micro finance and administration in Nigeria reveal pertinent factors militating against the effectiveness of institutions established for this purpose. Prominent among these factors are the inability of micro finance to get to the poor, disinterestedness of commercial banks and the fact that potential beneficiaries are largely unorganized. Others include lack of an enabling environment for small businesses to thrive and the erroneous impression that micro finance is a public sector responsibility. We have made appropriate recommendations to address these issues. We have also looked at critical factors responsible for the success recorded by micro finance schemes in other countries highlighting the lessons we can learn from their experiences. PAPER 2: Policy Needs in the Micro finance Sector: The Missing Angle. Micro finance has development as its fundamental aim. A good micro finance policy should therefore aim at enabling the poor to increasingly move out of poverty through cycles of loans and repayment. Minimal regulation should be exercised. Policy should focus instead on increasing the capabilities and capacities of MFIs and their clients—the SMEs. Policy should incorporate good practices and policies based on Regional (Africa-wide) studies. PAPER 3: Situational Status of Micro finance Institutions. Having recognized that micro finance could be used for poverty reduction, the formation of MFIs at all levels should be encouraged. An assessment of the activities of micro finance institutions in Nigeria has shown that the poor are good credit risks. The increasing access of the poor to credit and their unmatchable repayment rates suggests that micro financing should be a viable enterprise. But government must create the enabling environment by, among other things, easing regulations and giving incentives to quicken the creation of MFIs. Incentives need to be given to people, groups and institutions that already operate micro credit institutions to strengthen and upgrade their operations.