Bad loans in the micro finance sub-sector is estimated to have reached N80bn, according to the President of the National Association of Microfinance Banks, Valentine Whensu.
To stop the rise in NPLs, the association wants to reduce the likelihood for default by ensuring that borrowers get insurance, and by having its micro finance banks improve on credit reporting, background and credit checks, before issuing loans to borrowers.
According to the president of the association, the insurance sector will help the microfinance banks in the drive to bolster risk management practices.
The association is partnering with NICON Insurance in this regard.
“Let me remind you that this is the reason for the synergy or relationship between NAMB and NICON. One of the things that this relationship between us and NICON is going to give us is that before you collect loan, you must have been insured for the basic things… so that in the event that the unexpected happens to the person who has the loan, we have a place where we can get our money back.”
In the event of default going forward, NICON would pay.
The partnership will help to mitigate bad loans by increasing the banks’ risk management capabilities using insurance.