PROFESSIONALISM AS A PANACEA FOR THE ISSUES FACING THE MICRO-FINANCE SUB SECTOR

The Microfinance association

A lecture presented by Noel Ihebuzor, Dean, Centre for Research in Enterprise and action in Management  (CREM),

Ejigbo – Lagos.

Date: 29^th Oct. 2019

INTRODUCTION

The topic is quite broad. It is also provocative and perhaps deliberately so – Professionalism as a panacea for the issues facing the microfinance subsector. For issues substitute problem, for the absent location, kindly insert “in the country”.

Topic suggests that MF is facing a myriad of problems

But lack of Professionalism is singled out as perhaps the most critical of these problems.

Presentation will proceed in this way

First, we define MF and its humble origins and vision

Second, we discuss the advantages and benefits of MF

Third, we examine the meaning of professionalism in general and then

The specifics of professionalism as this relates to MF –

we attempt to distinguish between a banking/general finance model driven views of professionalism and a social enterprise driven vision of the same professionalism

Fourthly, we examine the problems of MF in the world generally and in Nigeria in particular

And fifthly, we end the presentation by focusing on the role that true professionalism can play in addressing the problems of MF in Nigeria.

I then end with some practical suggestions on the way forward.

Microfinance – definition and scope

A system of processes and activities which seeks to extend financial services to the poor and the financially excluded.

Its vision is social with an emphasis on social entrepreneurship

It seeks empowerment for the excluded.

It not only advances finances but it also builds capacity in financial literacy and skills in business development.

Since its humble origins in India, MF has grown in size and complexity

It now embraces things like rural development, artisanal development agricultural, improvement, including most areas in the agriculture value chain, improved seedlings support, support to financial literacy, green energy, climate change management – mitigation and adaptation etc

Micro refers to its size and not to its effects or impacts– recall marginal significance theory

Micro Finance Linked to the SDGs and theories of inclusion,

Reaches more people than traditional banking and our own dear isusu, and is increasingly adopting and adapting some methods from traditional banking, including the digital  – but here, caution needs to exercised – a he-goat and a bull are not the same even though both are + male + quadruped and + Herbivore

IN SUMMARY

Benefits of Microfinance

Boosts financial inclusion

Teaches financial literacy

Improves livelihoods

Boost access to persons at the bottom of the financial pyramid

Creates jobs

Creates confidence in the loanee

Has other multiplier effects including heath, nutrition and education

Key principles of MF

Services and not just loans

Build systems

Build up the loanee – the loanee is more than the sum total of the money you give him/her

Center all on the loanee

The most developed countries are those with the greatest incidence of financial inclusion

Professionalism 

Elements of Professionalism

Professionalism develops through a system and process of professionalization.

capacity

competence

commitment

confidence

clarity in communication

compliance

code of conduct – knowledge of, and willingness to abide by these

control – over self, over others

analytical

self-efficacy

integrity

continuous professional development

Existence of a professional association – norm setting and practice regulating

Peer learning and support

client centric

service focused

limited instrumentalism

Morality

Ethos/ethics

(BOTH MORALITY AND THICS LINKED TO NOTIONS OF INTEGRITY AND VALUE DRIVEN SERVICES)

mentoring

monitoring

standards

Transparency

Knowledge of what, of why, of how, and when

Responsibility

Context sensitive, adaptive and responsive

Agency/self efficacy

Accountability (to self and to others, and to the evolving demands of the profession)

Challenges and tensions involving professionalism in the practice of MF

The tensions in social enterprise

The tensions in Social Performance management

Efficiency versus social vision – does this not some folks behind?

Cost of money, interest rates, profits and sustainability

CPP and costs associated

Social Performance management and its costs – do benefits outweigh costs?

How do you do good and have a good bottom line?

Is MF bottom line different?

Problems of Microfinance

Fly by night NGOs

Lack of confidentiality

Limited CPP

Limited KYC

Limited focus on social performance

Excess profit focus

High interest rates, THESE TWO LEADING TO ACCUSATIONS OF

Predatory practices by MFI operators

Poor client management worsened by power asymmetry

Non-compliance with regulations

Incomplete contracts

Poorly trained COs and BMs

Bad and poorly defined work process

Limited internal controls

Poor separation of powers

Poor risk analysis

Limited due diligence

Links for Follow up reading by the brave 

Benefits of Micro-Finance

https://vittana.org/12-benefits-of-microfinance-in-developing-countries

https://plancanada.ca/microfinance-benefits

Key Principles in MicroFinance

https://www.cgap.org/sites/default/files/CGAP-Consensus-Guidelines-Key-Principles-of-Microfinance-Jan-2004.pdf

Professionalism in Micro-Finance   

https://www.linkedin.com/pulse/10-characteristics-professionalism-greg/n

https://www.aapc.com/blog/40477-10-characteristics-of-professionalism-in-the-workplace/