Failed government microfinancing could damage credit culture
The need to reduce poverty among Nigerians has been a long standing policy of government at all levels –at the centre, the states and the local governments. This has led to an increase in government funded microfinance programmers and institutions. The flagship programme of the federal government effort at poverty reduction is the National Poverty Eradication Programme (NAPEP), launched in 2001 to tackle poverty, particularly what the programme calls absolute poverty. Before then there was a poverty reduction programme known as Poverty Alleviation Programme (PAP) and many others. There is also the National Directorate of Employment (NDE) and many other minor efforts all focused on poverty reduction. The problem is that these efforts do not seem to have done much as poverty worsens.
The Nigerian economy was transformed in the 70s from agriculture-dependence to oil-dependence. This was the beginning of our transition from hard work to laziness. Since then our national values have headed south. Generations of incompetent leadership followed and a once wealthy, hardworking people resorted to government contracts, abandoning every good work ethic. The result is the present mass indiscipline, laziness, corruption and national decay. Our culture of honesty and hard work was consigned to the dustbin. Now as restiveness in the oil producing areas, the collapse of the price of oil and terrorism by Boko Haram team up to wipe away much of our national revenue, the poverty reduction efforts we make seem to be of no consequence. Clearly, they have failed to scratch the surface of the problem.
The reason is not hard to understand however. Evidently, the number of those getting out of poverty is far less than the number of those getting into it. In the language of Thomas Malthus, while those coming out of poverty are growing in arithmetic progression, those replacing them by entering into the poverty net are growing in geometric progression. The net effect will be a higher level of poverty than we had in 2001 when NAPEP replaced PAP. We need no scientific research to know that the whole country is now a large community of very poor and hungry people. The evidence is everywhere one looks. We are talking about abject poverty and destitution. People are so poor now that to bury their dead is sometimes impossible except with help from charitable neighbours.
I recently visited a family of a late woman where, after four days of her death, the children and their old father had no clue as to where they could find money to buy the cheapest pieces of wood knocked together as coffin. Someone had to donate the money for them to eat while hoping that somebody will also come in and help to finance the burial. The recent devaluation of the naira and the complicated economic management policies of government seem to have made dying a more difficult challenge than staying alive. To that family, life itself has become more meaningless than ever before. And this kind of situation is not a rarity in a lot of places. With a bag of rice at N24,000 where most people are unemployed, there is much to do on poverty reduction than a wave of slogans. We need a marshal plan on poverty reduction as the present efforts have failed.
The insurgency in the north-east has made nonsense of the current poverty alleviation programmes in that region. Even if the programmes focus on that zone alone, they cannot make much impact, given their limited budget. This is to say nothing about the on-going destruction of farmlands and crops by heavily armed Fulani men. So food production is being abandoned in many places. Or the massive destruction of homes and shops in places like Owerri Imo State, that has thrown thousands into the streets in search of nonexistent jobs. Even a good policy of road expansion badly implemented could be worse than a bad policy. Without doubt, mass poverty is growing across the nation. If we add the impact of the recession, now exacerbated by a mix of strange policy outings, then it becomes clear that we are getting poorer by the day.
There has been proliferation of government sponsored microfinance programs across the country, some of which exist only on paper with substantial amounts voted annually for their operations. Although the avowed objective of these programmes is the combating of poverty, many have become tools of political gimmickry and in some cases outright fraud against the people. Essentially, there are now so many public sponsored microfinance programmes that have either failed or are quietly rested across the states, raising the spectre of unfulfilled expectations and a trail of irrecoverable loans. These loans have become abandoned and the beneficiaries have taken them as gifts from government. This does not augur well for microfinancing. It has negative consequences on commercial microfinance and the culture of repayment.
One of the things that make microfinancing successful is the fact that the poor can be trusted to pay back their loans. Anything that spreads the belief that loan beneficiaries can do without paying back the loans is dangerous for the industry. And that is what the failed government microfinance programmes are propagating.
There is ample research evidence that governments with little or no experience operate subsidized, ad-hoc and inefficient microfinance programmes. They are often transient and without the institutional structure to achieve sustainability. More important, they are often politically motivated propaganda instruments with large numbers of wilful defaulters made up mostly of the political elite. The defaulters are part of the political leadership for whom the programme was actually initiated as part of a corrupt patronage system.
In some countries, such defaulters who are often influential political figures are forgiven their loans. In worse cases, the programme shuts down once they have taken their loans. This has the tendency of polluting the credit environment with very serious implications for private or commercial microfinance. For instance, private microfinance clients may also begin to see their loans as gifts that need not be repaid. Private microfinance institutions must therefore scan their operating environment to understand the experience of their potential clients with publicly funded microfinance programmes. This will enable them to make appropriate policy adjustments to prevent losses caused by a culture of wilful default.
Emeka Osuji