Central Bank, LAPO brainstorm on sustainable microfinance institutions

Central Bank of Nigeria (CBN) has identified sound corporate governance and proficient human resources as key to a sustainable microfinance sector.

Similarly, chairman, governing council of LAPO Institute, Dr. Godwin Ehigiamusoe, disclosed that achieving institutional sustainability remains a huge challenge for microfinance institutions.

Director, Other Financial Institutions Department, CBN, Agnes Martins, and Ehigiamusoe made the remarks at the 5th conference on Microfinance and Enterprise Development organised by LAPO Institute in Benin City, Edo State.

The conference theme was ‘Human Resources, Corporate Governance and Microfinance Sustainability in Nigeria’.

Martins said, “It is impossible for any institution, including microfinance, to survive without sound corporate governance and competent human resources.”

She hinged a high failure rate of microfinance banks (mfbs) to poor asset quality and, sometimes, outright fraud, adding that quality of human resources should be given utmost priority.

“With a strong workforce and best corporate governance, appropriate policies and strategies can be formulated. Effective oversight hinged on the presence of a principled board and management will enhance productivity at all levels within an organisation and translate to sustainability.

“The question arises why some institutions are able to consistently meet and even beat all regulatory minimum prudential ratios and financial soundness indicators while some eventually fail. The critical distinguishing factors are the quality of corporate governance and human resources,” she said.

The apex bank’s director noted the sustainability of microfinance institutions as the crux of the financial inclusion and poverty alleviation efforts of stakeholders, including the government.

In his speech, Ehigiamusoe asserted that the potential of mfbs to address mass poverty and unemployment would remain mere potential in the absence of sound corporate governance.

“A strong relationship between good corporate governance and institutional viability has been amply demonstrated. Effective governance is required to set viable goals and direction, perform oversight functions and demand performance and accountability from the management,” he said.