Poor analysis of market risk has been picked as the major cause of loan default, especially by micro, small and medium enterprises (MSMEs).

Giving the hint, Chief Risk and Compliance Officer of Accion Microfinance Bank, Kazeem Bisiriyu, highlighted other causes to include economic instability, rising operational costs, reduced cash flow and market volatility.

He said this during a press conference to mark the bank’s 20th anniversary, stating that the challenges create market risk that affects purchasing power, thereby reducing the cash flow of customers.

Bisiriyu said while profitability is important for every financial institution, the need to also recognise and ensure customers are supported responsibly and sustainably was critical.

He said the reason banks place strong emphasis on customer assessment, risk management, financial discipline and lending solutions is that they align with customers’ repayment capacity and business realities.

The Managing Director and Chief Executive Officer of Accion Microfinance Bank, Taiwo Joda, said that with the country’s SMEs battling inflation, currency volatility, and high operating costs, one of the major gaps remained access to affordable and sustainable financing for small businesses, particularly businesses operating within formal and underserved sectors.

He said many SMEs also required flexible financing structures, business support and improved access to financial education to remain resilient within today’s economic environment.

Looking ahead at the role microfinance banks could play in Nigeria’s economic growth, the bank chief said that with about 40 million micro-medium enterprises across the country, they have contributed immensely to economic growth, adding that Accion, as a microfinance bank, has impacted through giving loans, granting access to credit and financial services, as well as serving as an advisory to the micro-entrepreneurs.

According to him, the bank has been able to maintain a 99.5 per cent collection rate, without any attempt to pressurise their customers as modes of payment have been mapped out vis-à-vis their cash flow.

On what has been the bank’s approach to lending and support for SMEs that ensures reduced non-performing loans and growth for its customers, Accion Board Chairman Christian Ruehmer pointed to responsible lending, proper customer assessment, and relationship-driven banking.

According to him, rather than focusing solely on loan disbursement, the bank places significant emphasis on understanding customers’ businesses, repayment capacity, and financial realities before providing support.