Auchi (Edo) – The National Association of Microfinance Banks (NAMB) on Monday advised operators of microfinance banks to stop giving out huge loans to individuals, to avoid the depletion of their shareholders’ funds.
Mr. Isaac Akowe, the Chairman of NAMB, Edo chapter, told the News Agency of Nigeria (NAN) in Auchi, near Benin, that such loans could lead to bad debt.
“According to the Central Bank of Nigeria (CBN) rules, loans to an individual should not go beyond N500,000.
“Those who borrow money should also always be monitored.
“Giving out huge loans to individuals could affect the banks’ shareholders fund, leading to bad debt,’’ he said.
Akowe, who is the Managing Director of Auchi Microfinance Bank Limited, said more microfinance banks in the country might collapse due to high cost of operations.
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He said the reason many microfinance banks were struggling to survive was because they were competing with commercial banks.
“The CBN has designed a model and rules for microfinance banks in Nigeria but most operators have deviated from the rules.
“If we follow real microfinance practice, this sector will thrive,’’ the NAMB chairman said.
He urged operators to reduce unnecessary cost in their operations to prevent more banks from collapsing.
“Our business should be for the active poor; I mean for people into small businesses like selling pepper, tomatoes and other petty traders,’’ he said.(NAN)
