MICROCAPITAL STORY: Lagos State Association of Microfinance Banks in Partnership with Greek Banking Group PROBANK to Create Common Software for Microfinance Banks in Nigeria

The Lagos State Association of Microfinance Banks has entered into a partnership with PROBANK, a Greek banking group, to design a common software for all microfinance banks in Nigeria. According to a press release on Vanguard – Nigeria, the centralized software system would link all microfinance banks in Nigeria and primarily address issues related to the clearing of cheques among microfinance banks. In this regard, the Chairman of the Lagos State Association Mr. Olutayo Adenekan, was quoted thus by the press release: ‘We [Nigeria] always had problems of clearing our cheques among ourselves and between commercial banks’. Mr. Adenekan was also quoted as stating that the aim of the partnership with PROBANK, is to ‘reduce, to the barest minimum, the numerous problems encountered by customers in the various microfinance and commercial banks’. The Lagos State Association is the regional chapter of the National Association of Microfinance Banks in Nigeria; it does not maintain a web presence.

Aside of the software, the Chairman revealed other initiatives of the Lagos State Association including discussions with an undisclosed foreign company to come up with strategies to improve equity funding for microfinance banks. In addition, the association has also established a committee to look into the cases of distressed microfinance banks in Nigeria. While no further comment/ information is available on the exact nature of issues involving the ‘distressed banks’; it is worthwhile to note that over the past few months the Nigerian microfinance sector has been facing a setback in the wake of several issues plaguing its microfinance institutions (MFIs), as per this March 2009 MicroCapital story. The story cites several factors impeding growth of the country’s microfinance players and the sector. Key factors highlighted include: Increased concentration of MFIs in urban regions as opposed to rural areas; Operational challenges in raising funds; Shortage of skilled personnel in the sector. Presumably these would be some issues addressed by the committee.

PROBANK is a Greek banking service group with headquarters in Athens and was established in July 2001 with an initial capital of approximately EUR 80 million. PROBANK is headed by its CEO and President Miltiades Damanakis and Vice-Presidents Marinos Paravalos and Petros Sepetas. As of June 2008, it had total assets worth EUR 2.84 billion. Net profit after tax was EUR 9.2 million, a 19.4 percent increase from its 2007 amount of EUR 7.7 million. As per information available in its website, PROBANK operates 92 branches in Greece.

Discussions abound on the impact of technology to the microfinance sector. The Consultative Group to Assist the Poor (CGAP) states that current technology has the potential to reduce costs for many MFIs in addition to improving efficiency, accuracy and potentially increasing outreach for many MFIs. In a March 2009 article on ComputerWorld, the executive director of the Seattle-based Mifos Initiative George Conard opines that investments in Information Technology (IT) by the microfinance sector produce ‘significant returns’ not just in terms of ‘decreased transaction costs’ but also ‘increased insight into the business’. However, the 2008 Microfinance Technology Survey by the Consultative Group to Assist the Poor (CGAP) reveals technology to be one of the greatest challenges faced by MFIs globally with many microfinance institutions (MFIs) simply not investing in technology or committing resources to fund inadequate technology projects, thus limiting their ability to compete. In the case of Nigeria, the survey named Sub-Saharan Africa (which includes Nigeria) as one of the regions with maximum number of MFIs using manual systems and spreadsheets. MicroCapital has extensively featured stories focusing on the impact of technology to microfinance; please lookup here for a list of past stories.