Nirsal Micro Finance Bank: Does it matter for Arochukwu rural economy?

Kanu Ohuche

On Monday, 23rd December 2019, Nirsal Microfinance Bank Arochukwu will formally open for business. The bank is located in the old post office building along Barracks road in Arochukwu urban area. Central Bank of Nigeria, in 2019, licensed the bank to operate as a national microfinance bank with branches in most of the local government areas of Nigeria. It is important to note that this microfinance bank is jointly owned by the Bankers Community (50%), Nirsal (40%) and Nipost (10%). However, we recall that before now, there was the Arochukwu Community Bank (ACB), which later transformed into Arochukwu Microfinance Bank ( MFB),  both of which unfortunately have ceased to function. Consequently, as the stakeholders launch the Nirsal Microfinance bank, the rural banking public in Arochukwu is a bit apprehensive as to whether the new microfinance bank will not suffer the fate of its aforementioned predecessors.

Perhaps, this apprehension is fed by other concerns such as whether another microfinance bank can survive in the context of the challenging business environment in Arochukwu and its environs? What are the prospects for the growth of medium, small and micro enterprises in Arochukwu local government given lack of basic physical infrastructure such as roads and power? Does it have any competitive edge over the more established banks such as Union Bank and First Bank already in operation? More importantly, with uncertainty around payment of salaries in Abia State, will the poor level of disposable income of rural dwellers support savings and investments that is expected to sustain the bank? These and many more questions require urgent answers, if only to assuage the banking public and reassure everyone that this ‘’new kid in town’’ is worth giving a try. Currently, it will be important to assume that the public is hungry for relevant information on the basic underlying reasons for establishing the bank and its prospects in these economically trying times. This piece is therefore an attempt to enlighten the people on the objectives, business model, prospects and the advantages of the Bank to the development of small and medium scale businesses in Arochukwu local government Area.

Microfinance banking in Nigeria is justified based on a number of reasons; first, only 35 per cent of the economically active population have access to finance in Nigeria, while the remaining 65 per cent are excluded from financial access. Second, conventional commercial banks do not have business models that accommodate the small and micro nature of the credit finance required by small businesses to thrive. Consequently, over one third of the economically active population resort to informal means of accessing credit finance including Non-Governmental Organisations (NGOs), money lenders, friends and family, and credit unions etc. These credit sources, apart from the high interest rates they charge to cover their risk exposure for fear of default, lack proper regulation which impact negatively on the ability of Central bank to achieve   monetary stability and sound financial system objectives.

In addition, the history of micro finance banking in Nigeria has been replete with unsuccessful stories given challenges associated with sustained economic instability and issues of poor corporate governance. Specifically, most of the existing micro finance institutions across Nigeria are routinely challenged by poor capital base which has implication for the size of the loans they can create; inability to mobilize deposits due to weak savings culture; lack of asset- based collateral, which increase risks of default and furnishes the need to simplify their operations and tailor rural credit demand to strategic needs of the customers. The happy news is that these constraints on the operation of the micro finance bank were substantially addressed by Nirsal Microfinance bank and I will explain shortly.

The establishment of the Nirsal Microfinance bank is justified by the following reasons; currently very few existing national microfinance banks have national reach to rural communities in Nigeria. What we have seen over the years is that licensed national microfinance banks open offices in the urban centres where they gradually become micro finance banks only in name, but gradually transform into full commercial banks in operation. Consequently, such transformation quickly reinforces an inverse relationship between increasing number of national micro finance banks and geometrically increasing number of the financially excluded in Nigeria. In the light of this, financial access, especially among rural dwellers comes with very high lending rates and priced out of the reach of those that genuinely need it. This impacts negatively on their saving and investment capabilities and by extension the growth of both the rural and national economy. Therefore, the establishment of the Nirsal Microfinance bank was designed to fill these gaps both in its vision and mission; strategic objectives and the concept of its business benefits to the rural dwellers.

For instance, the  vision of the Nirsal Microfinance bank  is ‘”delivering transformative financial and non-financial services all over Nigeria”’, while its  mission is “’to be an effective National Micro finance Bank providing affordable products and Services in Nigeria using appropriate technology, and well-motivated staff”’. While the vision is targeted at bridging the widening gap between credit demand  and supply in the rural areas, its mission is aimed at making credit finance not only available but affordable through improved banking services that will serve the growth of host rural communities including Arochukwu local government. The strategic objectives is therefore anchored on the  need to make the Nirsal microfinance bank the hub for driving financial inclusion nationwide; creating jobs and enhancing the skills of citizens in rural communities; access to cheaper and affordable funds by Nigerian small holder farmers; easy access to credit and other financial services for SMES; more urgently,  filling the gap arising from possible closure of some unviable Micro finance Banks across Nigeria, and the last and by no means the least, to improve and grow the economy of Nigeria on a sustainable basis.

As to whether the Nirsal Microfinance Bank matters for Arochukwu rural economy, my answer is an emphatic YES. And this is why. Some of the products are tailored to meet the needs of rural dwellers that face the twin challenge of low savings culture and fringe bottom lines for their micro businesses. The business model of Nirsal Microfinance bank offers a range of products that encourage micro and corporate savings on one hand and micro and corporate credit on another in a model that leaves no one interested in access to finance behind. Let’s take a look at some the unique products designed to serve the rural dwellers in Arochukwu and elsewhere which has  taken into cognisance their unique financial and business environment challenges. 

  • AGRICULTURAL SMALL SCALE BUSINESS ENTERPRISES in Arochukwu Local government can access up to N10 million at 5% interest rate  per annum from the Agricultural Small and Medium Scale Enterprises Scheme ( AGSMIES) promoted by Central Bank of Nigeria and administered through the Nirsal Microfinance bank. With micro and small agricultural investments growing in and around Arochukwu local government area, this presents rare opportunity for genuine investors in agriculture  to access modest credit at the lowest interest rate in Nigeria, 
  • THE CBN ANCHOR BORROWERS PROGRAMME ( ABP)  which is intended to create a linkage between anchor companies involved in  agricultural processing and small holder farmers to provide the feeder stock of raw materials to the plant can also take advantage of these facilities to drive their investment in small processing plants with the potential to engage small holder farmers operating in  Arochukwu local government Area. The backward integration in agricultural value chain improvement in the local government will be heavily boosted through this product. 
  • NIRSAL MICRO FINANCE ALL ACCESS SAVINGS ( NAS)  is a product targeted at existing small businesses and individuals who want to grow their income stream by depositing with  an opening balance of as low as N2, 000 and a minimum account balance of N1, 000 at deposit interest rate of 4,05 per cent per annum. This simple deposit mobilisation product is targeted at the very poor and is capable of not only encouraging them to earn a little more money to grow their disposable income  but inculcate in them the culture of savings currently at a very low level in Nigeria..
  • NATIONAL MICRO FINANCE BANK ACCESS FOR KIDS ACCOUNT (NAK). This product allows parents to save for on behalf of their children aged between 0- 18 years. The minimum opening balance is N500 and once the child is above 18 years, he/she can choose to migrate to normal saving accounts. This product is a long term instrument which will encourage young couples to begin to save for their children education in the future and reduce their burden of training their children as the family grows.
  • NIRSAL EASY ACCESS SAVERS ACCOUNTS ( NAES) This is a savings account  product designed for quick opening with  primary focus on individuals who want to engage in active saving culture. This account has opening balance requirement of only N1, 000 with no minimum balance. This suggest that you can grow the account to any level you want provided you have what it takes to fund it.
  • NIRSAL MICROFINANCE BANK ACCESS TARGET ACCOUNTS  (NAT).This account is targets  SMEs and individuals who wish to save regularly for a certain period of time to accomplish a purpose such as shop rent, buy goods, purchase equipment and for festivities ( Ikeji and Christmas for Aro residents). A lien (limit) is placed on the account with limited withdrawals by the account holder based on his or her instructions. This account has an opening balance of only  N1,000 and a minimum balance of N500.
  • NIRSAL MICROFINANCE BANK QUICK ACCESS INDIVIDUAL CURRENT ACCOUNT; this product is developed for individuals/ businesses owned and operated by either personal names or partnerships. Its basic features include, access to loans, third party transactions, access to electronic banking channels and no minimum balances.
  • NIRSAL MICRO FINANCE BANK QUICK ACCESS CORPORATE ACCOUNTS – This product is designed for corporate bodies such as limited liability companies, registered business names and NGOs. The account has an opening balance of N1,000 and a minimum Balance of N500.

In conclusion, it is understandable that Nirsal National Microfinance is unique in its business model and set objectives. If the business model is strictly followed the possibility of the microfinance transforming into a commercial banks and subsequently abandoning its target population may not occur. Arochukwu local government, given its unique business environment challenges is well positioned to take advantage this bank offers for the growth of its rural economy and that of the Nigeria economy too. PLEASE HURRY TO THE BANK TODAY AND MAKE YOUR PRODUCT CHOICE BEFORE THEY RUN OUT OF STOCK. Ndewo Nu.

About author

Kanu Ohuche Ph.D

Mazi Kanu Ohuche holds a Doctorate in Development Economics, specializing in Institutions and growth, from University of Nigeria, Nsukka ( UNN). He holds a first degree in Economics and Masters in International economics from the same University. Dr. Ohuche also holds a post graduate Certificate in Budget and Public Expenditure Management from Duke University Sloan’s School of Public Policy in Durham North Carolina, USA and was a University Lecturer .He was the IMF Country Economist for Nigeria for four years and has been Adviser to Four Economic Advisers to the President of Nigeria. Currently, he is the Special Adviser to Dr. O. J Nnanna, the Deputy Governor in charge of Financial System Stability in Central Bank of Nigeria. Dr. Ohuche is married with four kids and resides in Abuja.

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