Expert Decries Low Deposit Base Of Microfinance Banks

A financial expert, Mr Deji Olanrewaju, on Tuesday in Lagos
attributed the low deposit base of microfinance banks for their high lending
rates.

Olanrewaju, a member of the Governing Council of Chartered
Institute of Bankers of Nigeria, told newsmen that microfinance banks required
urgent intervention of government.

He said that microfinance banks would continue to charge
high interest rates if people were not patronising them in terms of deposits.

“The only way to remain in business is for the operators to
charge higher interests on loans than commercial banks do.

“Lending rates depend on certain variables.

“The rate at which one microfinance bank lends money differs
from another, depending also on their depositors’ ratio.

“After deducting overhead and other expenses, these banks
must make profits or fade out of existence,” he said.

Olanrewaju said that building people’s confidence in the
micro financing was about growing the local economy.

He said that the difficulty of retrieving deposits from
operators of failed microfinance banks had weakened people’s confidence in
them.

“Micro finance institutions are meant for the grassroots
businessmen and women. The intent is for them to lend money at minimal interest
rates,” he said.

Olanrewaju urged the government to develop blueprints that
would stimulate more investor confidence in the sub-sector.

He also called for improved regulatory environment for
microfinance banks to ensure that defaulters were duly punished.