Izon-Ibe Microfinance Bank: A Strategic Initiative For People Empowerment
Micro finance banks are institutions that are established to provide financial services to the active poor. Two categories of microfinance banks (MFBs) are recognized under the micro finance policy of Nigeria. The first category has MFBs licensed to operate as unit banks and within a local government area.
The capital requirement for this type of banks is N20 million. In the second category are microfinance banks that are licensed to operate on a state wide basis. Each of such banks requires N1 billion as capital and may attempt a national outreach subject to meeting additional conditions by the Centre Bank of Nigeria.
Basically the goals of any Microfinance Bank include the following:
To provide diversified, dependable and timely financial services to the economically active poor
To mobilize savings for financial intermediation
To create employment opportunities
To involve the poor in the socio-economic development of the country
To provide veritable avenues for the administration of the micro-credit programmes of government and high net worth individuals
To render payment services such as salaries, gratuities and pensions on behalf of various tiers of government.
Eliminating gender disparity by improving women’s access to financial services.
Thus micro finance banks have dual mission – social mission and financial
Sustainability. The Social Mission of Micro Finance Banks. The social mission of micro finance Banks is targeted at the improvement of the quality of life of the poor. It is important to note that the poor have the capacity to save and pay their loan. The poor also need sustained access to financial services. A micro finance bank will be adjudged successful in its social mission if its activities lead to:
Increase in income for the poor
Less volatility in household expenses
Financial sustainability for a micro finance bank mean that its operating income must cover its administrative costs, provide for its loan losses, provide for cost of funds, take cognizance of effects of inflation on its funding requirements and provide for ploughing back of income for growth of the institution.
It is the ability of a micro finance bank to strike a balance between its social mission and financial sustainability that ensures its long run survival. It is important to recall that In 1999, The CBN directed all banks operating in Nigeria to set aside 10% of their profit before tax for SME equity funding. Banks were encouraged to set up venture capital companies to administer the scheme. Not much success was recorded by the scheme which was subsequently discontinued. The community banks were established to establish basic financial Services to the poor but they were scrapped because of weak capital base and weak institutional structure. More importantly, Microfinance Banks could not fulfill their sustainability objectives.
During his thank-the-people tour Governor Seriake Dickson saw the need to improve community livelihoods by improving the standard of living of the citizenry. One of the instruments of achieving this objective is the establishment of the State-Owned Microfinance Bank called Izon-Ibe Microfinance Bank. The thinking was to bring loan facilities to the grassroots for people empowerment.
The Izo-Ibe Microfinance Bank is a grassroots-oriented financial institution and a source of financial services for entrepreneurs and small businesses lacking access to banking and related services. The two main mechanisms for the delivery of financial services to clients are: Relationship-based banking for individual entrepreneurs and small businesses, and group-based models, where several entrepreneurs come together to apply for loans and other services as a group. The institution is aimed at supplying financial services to low-income employees, which is closer to the retail finance model prevalent in mainstream banking. It was an outstanding and unforgettable event on November 13, 2015, when Governor Seriake Dickson, ended his three-day community to community campaign with a visit to Southern Ijaw communities with the commissioning of the State-owned Izon Ibe Micro-finance Bank in Oporoma, headquarters of Southern Ijaw Local Government Area.
The establishment of the Izon-Ibe Microfinance Bank was geared towards promoting self- reliance, employment generation and wealth creation. The bank would boost commerce in the area, as people in the area majority of who are fishermen and traders would have access to loan facilities. At the commissioning of the Bank, Governor Seriake Dickson, immediately opened an account with the bank with a deposit of One Hundred Thousand Naira N100, 000. 00 only shortly after declaring it open, because the financial institution was established to promote entrepreneurship through direct and easy access to start-up capital for small and medium scale businesses. To this end, the governor made N200 million available to the bank, N25 million per local government area, to enable the Izon-Ibe Microfinance Bank offer loan facilities to willing small and medium scale entrepreneurs to borrow and do business.
The IBM, as a grassroots-oriented financial institution has important roles to play in the successful leadership of the Restoration Government and the development of Bayelsa State at large. In a bid to reduce the harsh effect of poverty, a lot of people have taken to small scale business among other steps. These small businesses, which often require less capital to start up, have the potential of providing reasonable income to enable the poor meet basic human needs. With a failing oil economy, the drive towards entrepreneurship as purveyor of development and the critical role of micro-financing in poverty reduction has become very important.
In the past, micro enterprises were often hampered by inadequate capital resulting from rigorous and formal procedures and high collaterals required by commercial banks before loans can be granted to the poor. The Izon-Ibe Microfinance Bank will therefore provide much-needed micro-capital to reduce poverty and serve as a means of empowering the poor and providing a valuable tool to assist the economic development process especially among the poor. It is a pro-poor policy.
More so, the bottom-up approach is that, it encourages self-employment projects that can generate income to mitigate the devastating effect of rural poverty on the people. The Bank is an advantageous because the interest rate is minimal as it’s was designed to empower people by teaching them to fish. Thus traders and civil servants working in the rural areas, are to open an account with the bank, which has branches in the headquarters of all the local government areas to avoid the cost of moving to Yenagoa to avail themselves of banking services. The bank which has offices in the eight LGAs serves as a srong catalyst to boost production in critical sectors of agriculture, commerce, healthcare and education.
There are many credit scheme open to individuals and cooperative societies. Some of the schemes include: Borrow As You Save Account, Staff Salary Advance Account, Thrift Deposit Account, Agric/Allied Loans Account, Quality Life Scheme Account, Savings & Current Accounts, Fix Account, Swift Loan Account, LPO/Invoice Discounting Account, Group Loan Account, Employee Loan Account, Enterprise Loan Account , Sole Proprietorship Account, Corporate Current Account, Unincorporated Bodies Accounts and Clubs, Churches, Mosques & Societies Account, which would complement the restoration government’s efforts at creating sustainable wealth in the State.
It is hereby recommended that Head of Corporate Services/management work out modalities by which all salaries of workers in the lowest category of public service are paid through the Bank. The Bank should also set up a special scheme for the welfare and benefit of civil servants. “If they open an account, they should create a product for them and for every civil servant who opens an account, the bank should facilitate the payment of salaries with minimum delay.
ONLY a couple of days ago, the Bank presented a cheque to some Market Associations in the State, the secretary/legal adviser, Izon-Ibe Micro Finance Bank, Ms Patience Abah, presented a soft loan to a beneficiary, Mrs. Kpenseme Wilcox of Kpansia Market. There is immense power when a group of people with similar interests come together to work towards the same goals. It is hoped that the bank would achieve its short term and medium-term objectives by fulfilling its mandate. Surely, the Bank is one of the strong points in the empowerment scheme of the Restoration Administration.
Onyeche Success Onyeanuna
Is a member of the Bayelsa Social Media Team