Viewpoint: Reforming Microfinance to Alleviate Poverty, Foster National Development
By Chijioke Nelson
A development economist and professor of public policy, Jonathan Morduch, once said:
“Microfinance stands as one of the most promising and cost effective tools in the fight against global poverty.”That statement is true, judging by what some developing economies have done so far. The story of microfinance in other jurisdictions, like in Bangladesh, India and even Rwanda, is that of a success and millions of people being lifted out of poverty.But the hard reality is that each success was dependent on regulatory dynamism and stakeholders’ commitment to play by the rules. Of course, there must be evolving framework and the institutions would be focused and be available where they are needed.
Microfinance policy was initiated in Nigeria in December 2005 as a response to observed challenges of financing the real sector, mostly dominated by the Micro, Small and Medium Enterprises (MSME) and boosting rural finance.The policy’s objective, which led to the establishment of microfinance banks in Nigeria, was to provide diversified, affordable and dependable financial services to the active poor, in a timely and competitive manner.
It was to serve as a guide for the activities of informal unregulated institutions, as well as new entrants in the sub-sector and aimed at ensuring that operators within the sub-sector are guided by a set of rules, principles, and a robust legal framework.
Photo courtesy of Commonwealth Secretariat.