Formal Microfinance Institutions are not native to Nigeria, the idea of formalising microfinance banking was imported from Asia. However, in drawing up the policy template, the country's apex financial body, Central Bank of Nigeia (CBN) adopted the wrong model by jumping straight into commercial microfinance banking. The story today is that most of the institutions licensed by CBN at the inception of the policy are either dead or breathing their last breath. The response of the apex body has also not helped matters because, it is applying same medication to all institutions showing similar symptons without thoroughly investigating the underlying root cause of the percieved symptons.
From experience drawn from being involved in the setting up and managing a commercial microfinance institution, it is my considered opinion that the CBN should have adopted the NGO model of introducing microfinance banking into the country for the first five years before gradually nuturing such NGOs to become commercial microfinance institutions. From available statistics, the NGOs turned to microfinance banks institutions have generally done better. The reason for this is not far-fetched; the first five years of any viable microfinance institution are always very critical for their survival and are better operated on a non-profit model. Memberships and donor contributions are needed at this stage as opposed to direct investment for profit. This is the period such institutions need external support in the area of seed capital and capacity development.
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