The Central Bank of Nigeria (CBN) says it will establish a microfinance development fund to promote accessibility to financial services for low income earners, just as it is planning a review of the 2005 Microfinance Policy.

Kingsley Moghalu, the deputy governor, financial system stability, said this yesterday at the opening of the 5th Annual Microfinance Conference and Entrepreneurship Awards, adding that the policy review would be announced soon.

Mr. Moghalu said the policy is currently at the final stages of internal approval, to help deepen Central Bank support to microfinance institutions and promote financial inclusion services for micro, small, and medium enterprisers in the country.

Acknowledging the recent revocation of the operating licences of 224 microfinance banks as controversial decision, he, however, said it was a necessary action, describing the operational environment of microfinance as regulated space, which operators must learn to play by the rules to protect the interest of most Nigerians in the low income groups.

“Promoting micro credits and savings is what Nigeria should be doing. That is why the CBN has been promoting financial inclusion by initiating a number of steps in recent times to bring financial services closer to the people, including the new mobile banking licences, establishing the non-interest banking, publishing the framework for Islamic banking, introducing a new banking model that emphasises a wider spread of financial services to Nigerians, including regional banks,” he said.

He reminded government about the importance of vigorously pursuing the power sector reforms as well as development of a reliable transport infrastructure, pointing out that though these are related directly with CBN’s work, their absence will make the financial system unstable and credit unaffordable.

Lack of access inhibits economic growth

Sanusi Lamido Sanusi, the CBN governor, noted that lack of access to financial services poses serious threat to national economic growth and development, saying that the importance of financial inclusion is crucial in fostering financial institutions’ objectives as well as facilitating the achievement of the Millennium Development Goals (MDGs).

“In Nigeria, the financially excluded are about 46.3 per cent of the population as a result of low level of bank penetration in the country, with the 24 commercial banks having only 5,789 branches as at September last year, which when added to the 815 microfinance banks amount to 6,605 branches. With over 150 million people, this implies a population of 22,710 per bank branch, with higher ratios in the rural areas. The number of people living below poverty line has increased to about 70 per cent,” Mr. Sanusi added.

This, he said, is unacceptable to the CBN, adding that empowering this segment of the population would contribute to a robust and inclusive economic growth and development.

“There is increasing need to devise more appropriate mechanism to deliver these services at affordable costs to the vast segment of the disadvantaged and low income groups, made of the marginal and landed farmers, women, self-employed and unemployed school leavers, urban slum dweller, socially excluded groups, and aged citizens,” he said.