The Managing Director of Action Microfinance Bank Mrs Bunmi Lawson has lamented that too much extravagancy has led to illiquidity of some microfinance institutions in the country.

Lawson who stated this in Lagos noted that because the capital base of MFIs is a lot smaller than commercial banks, lavish spending can easily affect the liquidity of  microfinance firms.

According to her, “when you start using your little capital to build gigantic branches, you  may end up  not having enough money for your target market.

“It is not that MFBs were not lending to the economically active poor but they were busy buying cars and building fancy houses, instead of actually focusing more of their portfolio to lending activities or mobilisation of savings,” she stated.

Stating further that ethics of microfinancing were not properly adhered to in Nigeria, she added that microfinance institutions should grant small loans to the needy, rather than granting bulky loan to an individual.

The principle behind MFBs is that you need a lot of small loans and you should ensure that you have a steady capital base that would enable you meet any liquidity problems at any point in time, she said.

Lawson expressed that most operators of MFBs are regrettably not too conscious about their lending processes as they give loans to too many people without proper monitoring.

This, she said, may later gulp up the bad loans in their respective banks.

She called on people to spare the industry more time before it could grow into a full fledged market that could compete worldwide.

Meanwhile, Mrs Bunmi Lawson has disclosed that her bank is not particular about big outfits, but small businesses that have the future prospects of developing into large businesses.

We allow our professionalism and good customer services speak for us and we ensure that we are liquid enough for grass root banking”, she said.

Lawson said that micro financing is all about giving small loans to micro entrepreneurs and that AMFB is very careful about ensuring that its customers’ repayment rate remains stable. She expressed the intention of the bank to cover the over 36 states of the federation in the near future.

For microfiance banking to thrive in Nigeria, she called on the federal government to provide an enabling environment for microfinance banks to thrive.  

“They should support us with technical training. we really do not need much financial support from them. What we need is an environment that would support our banks.” she reasoned.