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MICROCAPITAL BRIEF: Estimate: 90% of Nigerian Microfinance Clients Commit Fraud to Obtain Loans

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The National Association of Microfinance Banks (NAMB) South West Zone, a chapter of Nigerian trade group NAMB, recently hosted a capacity building program on combatting fraud and forgery committed by staff and management of microfinance banks (MFBs).  George Adetokunbo, Managing Director of Ipman Satellite Microfinance Bank, reportedly claimed that over 90 percent of MFB borrowers are in collaboration with bank insiders allowing them to provide false information such as fictitious addresses to obtain loans. David Adelana, Senior Examiner of the Central Bank of Nigeria (CBN), identified weak internal controls as responsible for allowing such high levels of fraud and advised managing directors to conduct proper monitoring activities over their employees. The program also informed participants regarding the regulations and penalties of microfinance fraud. In addition, participants were reminded that CBN retains personal records on MFB employees in an effort to combat fraud. As of 2011, NAMB has 820 member MFBs.

By Jennifer Young, Research Associate

About National Association of Microfinance Banks of Nigeria (NAMB)

The National Association of Microfinance Banks of Nigeria (NAMB) is a trade group of microfinance banks (MFBs) that merged with the Association of Microfinance Banks in Nigeria (AMBN) in 2009. As of April 2011, NAMB

has 820 member MFIs. Its Lagos State Chapter has 180 members as of December 2011.

About Central Bank of Nigeria (CNB)

The Central Bank of Nigeria (CBN) was established in 1958 as Nigeria’s central banking authority. As defined by the Act of Parliament that created CBN, its statutory mandates are as follows: “to issue legal tender currency; to maintain external reserves; to safeguard the international value of the legal tender currency; to promote monetary stability and a sound financial system in Nigeria; and to act as banker and financial adviser to the Federal Government.” As of November 2011, CBN reports total assets of NGN 12.7 trillion (USD 80.8 billion).

Sources and Additional Resources

Vanguard Story: “Over 90% of borrowers give fictitious address – MfB CEO”

MicroCapital Story: “MICROCAPITAL BRIEF: Nigerian Microfinance Banks to Adopt International Financial Reporting Standard (IFRS) by March 2013,” April 2, 2012.

MicroCapital Story: “MICROCAPITAL BRIEF: Nigerian Microfinance Banks Pledge to Form Single Organization in Response to Supervision Crisis,” November 20, 2009.

MicroCapital Universe Profile: National Association of Microfinance Banks of Nigeria (NAMB)

MicroCapital Universe Profile: Central Bank of Nigeria

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