Unending travails of small business owners, micro-credit loans
The desperate search for micro-loans and other credit facilities have dragged many low-income earners and small business owners into the “captivity” of Microfinance Banks (MfBs), and micro-finance institutions (MFIs), whose alleged crude loan recovery methods have left a bitter taste in beneficiaries’ mouths. GBENGA AKINFENWA takes a look at the treatment meted to some of the beneficiaries by these institutions.
As the weekend winds down, Folasade Owode becomes increasingly uneasy because of the embarrassment that lies ahead of her on the coming Tuesday. With her dire financial state occasioned by the poor patronage of her hairdressing business, Owode palpitates heavily as the day to her next loan repayment appointment to a microfinance bank draws closer.
But for the intervention of a good Samaritan, who helped raise the N3, 000 she needed for her weekly remittance, officials of the bank would have publicly disgraced her.
Owode is just one of the many artisans, petty traders and sundry small business owners, who daily strive to repay loans obtained from these firms on weekly basis.
Referred to as Gb’omu le lanta (placing the breast on a lit lantern) in Yoruba, micro-credit loans at the point of collection appear to be the succour beneficiaries need to be afloat in their businesses, but as the day progresses they become a source of misery to many. No thanks to the country’s limping economy that has made it arduous for beneficiaries to maintain their loan repayment plans.
While some beneficiaries have stealthily relocated to the rural communities as a result of inability to service the loans, others have developed life-threatening health challenges, including high blood pressure, while a few have been sent to their early graves, owing to the harassments officers from these financial outfits mete out to beneficiaries that cannot repay their loans.
For instance, in July 2019, Shakirat Rasheed, a 41-year-old woman, committed suicide in the Apete Area of Ibadan, Oyo State, after a friend that she stood for as surety fled without repaying the loan collected from a micro-finance bank situated at Awotan area of Ibadan.
On March 24, 2017, Madam Abigail Ogunyinka of Alakuko area of Lagos, escaped death by the whiskers, as she was rescued by fishermen, while attempting to commit suicide by jumping into the lagoon around the Ebute Ero area of the state. She attempted suicide after she defaulted on her loan repayment for two weeks because her food business suffered low patronage.
According to her, she took the step because she could not withstand the disgrace the bank officials would subject her to.
From Lagos to Abeokuta, Ibadan, Osogbo, Akure, Ekiti, Ilorin to other cities across the country, the mention of Lift Above Poverty Organisation (LAPO) sends shivers to some loan beneficiaries. Although, some people have immensely benefitted from these small credit facilitators, many worry while they should adopt harsh means to recover the loans.
Registered as a non-governmental poverty alleviation group with a microfinance bank as an affiliate, LAPO is not alone in the credit facility business. Other financial institutions offer similar services include Grooming Microfinance Bank (MFB); Self Reliance Economic Advancement Programme (SEAP), and Grace and Mercy Microfinance Institute (MFI), among others.
But due to LAPO’s popularity in offering small loan services, many illiterate beneficiaries now refer all others as “LAPO.”
Microfinance banks are fundamentally different from formal banks in various respects, including the absence of collaterals in loans negotiation; the simplicity of operation, and institutional role to connect the poor and underprivileged of society in developing countries.
Even though they come with different names and schemes, as well as offering different repayment plans, their operations and “forceful” loan recovery method appear to be across board.
The Guardian observed that one of the conditions for accessing loans is for potential beneficiaries to register in clusters through which the loans are disbursed. Each clusters is made up of 10 to 25 members and members are to choose someone from the cluster as head. They also appoint secretaries to document their weekly financial records. The bank’s Credit Officers (COs) administer/oversee each group’s weekly meeting.
For LAPO, the minimum loan disbursed to first-time borrowers is N20, 000, while the maximum is N50, 000; this could increase to N300, 000 depending on the consistency of the borrower.
The minimum loan from Grooming Microfinance Bank is N60, 000, while N80, 000 is the maximum with a N3, 500 weekly repayment plan. The sum of N500 from the N3, 500 is deducted as savings. This, however, differs from place to place.
To be eligible for some of the loans, a customer must have saved a minimum of 10 per cent of what he/she intends to borrow.
SEAP MFI, according to information on its website gives out weekly and monthly loans. It also offers facilities like production loans, equipment loans, educational loans and individual/enterprise loans, among others.
Subscription to health insurance is compulsory for those applying for loans of N200, 000 and above, while it is optional for loans of N50, 000 to N150, 000.
The repayment tenure of any loan is 40 weeks with 15 per cent interest rate and one week moratorium.
A leader of one of the LAPO groups in Abule-Egba area of Lagos, Victoria Egejuru, said: “As part of requirements for loan acquisition, we also pay for registration, insurance, forms, among others. The repayment plan for small loans is between 23 to 30 weeks. Aside from the weekly repayment, an average of N300 is added to the amount repaid as savings.
“To be eligible for a N50, 000 loan, one would have to first save the sum of N5, 000; pay N300 for insurance, N1, 150 for group registration, N200 for bank form, among other charges.
“Upon getting the loan, the borrower would repay N2, 800 weekly for 23 weeks, which is equivalent to six months. N300 of the weekly payment is the customer’s savings.”
Sunday Owelle, a commercial motorcycle operator in Ifo, Ogun State, who began to patronise Grooming MFB after his motorcycle was stolen, said he paid N25, 000 for savings, insurance, registration, bank form and other petty charges to access the sum of N100, 000.
Many of the beneficiaries say the repayment plans are flexible for them to repay without much ado, but with the economic situation many are either defaulting or struggling to honour their weekly repayment schedules.
Some of the defaulting beneficiaries alleged that the banks subject them to harsh treatment in their bid to recover the loans, pointing out that most times, the credit officers connive with their group leaders to apprehend, molest and embarrass them.
A victim, Mrs. Abigail Okanla, who resides at Osogbo, narrated how she was locked up in a toilet for hours for failing to make remittances for two weeks. Apart from such illegal detention, defaulters’ wares are sometimes seized.
On other occasions, defaulters are dragged to their houses, streets, traditional palaces or family compounds, to draw attention of good spirited people, who will then bail them out by paying the outstanding amount.
An eyewitness, while recounted an incident in the Awe area of Oyo State, said that a victim who obtained a loan from LAPO, but absconded from the area after defaulting for six weeks was dragged to the street half-naked, when she was caught.
“The defaulting customer returned home to pick some of her belongings, when the bank officials swooped on her and took her away with only her tops and a pair of knickers. Appeals to be allowed to dress properly fell on deaf ears,” the eyewitness recounted.
A goat seller in Eyenkorin area of Ilorin, Kwara State, Alhaja Abike Esho, claimed that she and her colleagues are used to the inhumane treatment from officials of some of the micro-finance outfits.
“We don’t have a choice because there is nobody to assist us. All we hear from government is promises of microcredit facilities, which we never get to benefit from. Daily, small scale loan seekers are joining these clusters to access loans despite the inhumane treatment.”
Madam Kabirat Oluronmbi, a resident of Ifo, said some micro-finance institutions have even resorted to beating up defaulters irrespective of the age.
She alleged: “Their victims are only released when they are satisfied that he/she has been properly disgraced. Despite this, people are still trooping to them on weekly basis to subscribe to their services because there appears to be no alternatives.”
When accosted, officials of the banks vehemently denied deploying coercive means to recover their loans, but The Guardian discovered from a credit officer attached to LAPO in the Ekoro area of Lagos (who prefers anonymity) that he and his colleagues have to adopt harsh methods to recover the loans because if they are unable to get back the monies, the whole sum will be deducted from their salaries.
“Deductions from my monthly salaries are becoming a recurrent decimal. About N15, 000 to N18, 000 is usually removed from my pay monthly; the same goes for other staff. With this, we do not have other options than to apply force; so, we do not bear the brunt of other people’s indebtedness,” he said.
But the management of LAPO has since dissociated itself from any of these inhuman treatments, saying such allegations are contrary to the company’s policy.
It stated: “No staff is entitled to mistreat a beneficiary for any reason. If we get to know of any of our staff that is involved in such act, we would severely discipline such a person. We have put out information on the social media to our divisional leaders, asking them to warn their staff. However, we strongly discourage such practices because they are against our policy. We would be glad if information about any of such unfortunate incident is shared with us. We promise to take up the case.”
A staff of Grooming MFB, confided in The Guardian that majority of the loan beneficiaries are always reluctant to pay back, which have informed their use of force.
“We discovered that a forceful approach has be adopted since majority of them have this money, but would not repay their loans. The only means to get our money back is to subject them to inhuman treatment, which has been yielding results,” he said.
All efforts to get responses from the Central Bank of Nigeria (CBN) on the issue for the past five months (May 2020 to October) remain unsuccessful. Mr. Isaac Okoroafor, former CBN, Director of Corporate Communications, failed to respond to questions sent to him till his retirement, while Isa Abdulmumini, one of the officers at the Media Unit, who was called on phone to comment on the issue laughed hysterically and said: “This is not a new story. Have you approached the Microfinance banks and what did they tell you?”
Abdulmumini, however, directed The Guardian to the bank’s complaint unit phone line: 07002255226 and Consumer Protection Department (CPD) through their email@example.com.
To date nothing has been done even when The Guardian has forwarded the complaints.