In a recent discussion with journalists in Abuja, the President of the Micro Finance Bank Association and Chief executive of Hasal Micro finance bank, Mr. Rogers Nwoke, acknowledged loan defaulters as a major threat to the Micro Finance bank industry.
A loan default is simply the failure to repay a loan according to the terms agreed to.
Mr. Rogers Nwoke attributed this obstacle to the bad credit culture in Nigeria. He laid emphasis on the fact that there are now “serial defaulters” who borrow money to either start or expand their businesses and intentionally refuse to pay back until legal actions are taken by Micro Finance banks.
He further disclosed that majority of these serial defaulters take loans from Micro Finance bank who do not have the resources to reclaim their money.
More so, for those who are willing but can’t pay owing to relative business challenges “all we do is sit with the person and have a work-out discussion with them and encourage them to pay.”
As a result of this, Mr. Rogers Nwoke, said that loans are given mainly to customers who have a good record of paying back.
To avert violence in the course of reclaiming its money, Microfinance banks have to embark on legal means which is most times not cost effective as it is expensive and takes up a lot of time.
This trend of consistent loan default experienced in the Micro Finance bank industry is bound to inhibit its growth as it will constrict its operating capital.
Access to loans by business owners will now be a rigorous one as Micro Finance banks will take extra measures to mitigate the risk of liquidation.