Giordano Dell-Amore Foundation

BANKING FOR THE POOR: THE CASE OF THE PEOPLE's BANK OF NIGERIA Author(s): J.C. Anyanwu and U.B. Uwatt Source: African Review of Money Finance and Banking, No. 1 (1993), pp. 87-103 Published by: Giordano Dell-Amore Foundation Stable URL: http://www.jstor.org/stable/23024778 . Accessed: 13/09/2013 01:55
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BANKING FOR THE POOR: THE CASE OF THE PEOPLE'S NIGERIA

BANK OF

J.C. Anyanwu College of Education, Nsugbe, Anambra State U.B. Uwatt University of Ibadan

1. Introduction In recent years public policies towards financial system and economic development have

shifted away fromthe old orthodoxy of financial repression (eg. subsidization of private financial institutions by government, imposing ceilings on interest rate, directed and
rationed in favour allocation of market of credit

liberalization). Here government intervention in the financial system is deemphasized

determined interest rates and credit allocation. Incidentally, this con

to approved

sectors

at low interest

rate, etc. to that of financial

entrenched in the IMF/World Bank spon cept of financial liberalization has been firmly sored stabilization and Structural Adjustment Policies (SAPs). In Nigeria, the financial market deregulation and financial liberalization accompanying the adoption and implementation of the Structural Adjustment Programme (SAP) since 1986 has resulted in a rapid upsurge in the growth of traditional banking institutions
such finance ment as commercial houses in interest and rates. and stock This merchant broking banks, firms. and non-bank there financial has been institutions an upward such as In addition, rate structure and merchant years move

modalities operational of these banks to the scale but legitimate these ty to expand

high interest of the commercial areas despite

with the collateral-based coupled banks and the limited spread of concerted credit. effort to promote

rural

ruralbanking has made itimpossible forthe under-privilegedNigerians engaged in small

businesses businesses to have and thus access reduce to bank the burden Consequently of the structural their abili adjustment

many

programme is greatly impeded.

It is also important Review the to note that at the instance in 1975 rural of the Central and The number Bank the System Committee of the recommended areas by banks.

cial

of Nigeria, the Finan Federal Government which started in

to ensure

approved a programme of geographical dispersal of bank branches particularly designed 1977 ended its officialthirdphase in 1989 (and established in 1991) with a total of 765
rural branches opened penetration scheme of 766.

cure credit facilities fromthese commercial banks due to high costs of credit (particu
interest rate larly in a deregulated and low financial illiteracy, requests given their high-risk. lack environment), which commercial in an attempt of collateral banks security, high level consider not worthwhile this credit-scarcity con

pressive

performance,

by 1990 out of a total allocated most rural dwellers especially

the low-income

group

this im Despite cannot se

to extend

It was

to overcome

straint that the People's Bank of Nigeria (PBN) Limited was established. The bank is a specialized financial institutionestablished by the Nigerian government to provide 87

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AFRICAN REVIEW OF MONEY, FINANCE AND BANKING - 1/93

credit The

to the main

poor. of this paper, therefore, is to evaluate the performance of the Peo

ple's Bank of Nigeria withinthe two years of existence. Accordingly, the paper is divid ed into sections. Section two deals with the formation, aims and objectives of the Peo ple's Bank of Nigeria. In section three we look at the operational modalities of the bank while evaluation of performance is done in section four. Section five is devoted to poli
cy recommendations.

purpose

2. Formation, Aims and Objectives The People's

independence broadcast

of PBN

Bank of Nigeria came into existence on October 1, 1989 during the 29th
anniversary of the President and Commander-in-Chief of the

armed forces of the Federal Republic of Nigeria, General Ibrahim B. Babangida. However the commissioning of the firstbranch of the bank at Ajegunle (a rural slump settlement
of petty services businessmen of PBN. and women

firstdisbursement of loans at the occasion

in Lagos)

two

marked the official beginning of banking

days

later

by the

President

and

the

The People's Bank of Nigeria derives its philosophical focus and operational modali ties from the Grameen Bank of Bangladesh; a specialized financial institutionestab lished by the government of that country for providing loans to the poor and uplifting their economic conditions. The Grameen Bank is one (and perhaps the best example) of such institutions in developing countries directed at the poor. Others include Micro fund in Philippines, Association forDevelopment of Microenterprises (ADEMI) in Domini
can

ment Foundation in Zimbabwe; Working Women's Forum in Madras, India; Badan Kredit Kecamettan (BKK) and Kupedes both in Indonesia (World Bank, 1990).
to ameliorate the suffer Bank of Nigeria is seen as a strategy the People's at curb mass masses them with easy credit; unemployment by providing its at the grassroot. and encourage economic self reliance the grassroot Accordingly, Generally, ings of the objectives a) Extend as spelt out by government to the poor are to, among who do other things: access to the credit

Republic;

Small-scale

Enterprises

Programme

in Calcutta,

India;

Saving

Develop

facilities available at commercial banks.

Create opportunities for self-employment

banking

facilities

people

not have

b)

for the vast,

unutilized

and

under-utilized

88

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J.C. ANYANWU,U.B. UWATT BANKING FOR THE POOR

manpower

resources.

c) d)
e)

Bring disadvantaged
which they can

people together with the goal of some organisational formats

and operate.

understand

Eliminate exploitation by shylock money lenders.

Help cushion some of the painful effects of SAP on poor sectors of the economy.

f)
g) h)

Compliment government's effortsin improving the productive base of the econo

my and Halt To the raising rural employment and at the grassroots level with its attendant benefits for and income. rural-urban inculcate lower migration, habits

banking classes. the

In order

to ensure

achievement

of these

tions of the bank, it was given a legal status as a specialized financial institutionby Decree No. 22 (People's Bank of Nigeria Decree 1990) of 30th July 1990 and effective October 1, 1989. According to Section 2(1) of this decree, the functions of the bank include: a) the provision of basic credit requirements of the under-privileged Nigerians who are involved in legitimate economic activities in both urban and rural areas and who
cannot

objectives

and

to streamline

the

opera

their inability to provide collateral security;

b) the acceptance of such savings bulk sums, on of savings from the same with any together short term deposits group of customers interests after thereon, with commercial and

normally

benefit

from the services

of the

orthodox

banking

system

due

to

and

make the

repayments money, banks. in

placing merchant

The main targets are the under-privileged Nigerians comprising road side mechanics,
and electricians, self-employed, plumbers and other livestock truck pushers, keepers, dressers, to improve washer their men trade and and women, economic and petty petty traders, tailors, small-scale dress need who farmers, barbers, financial makers, poultry hair

other

persons

assistance

well-being.

3. Operational
The People's

Modalities
Bank

of the PBN:
started member on an task experimental force. The task basis force between was October expected and to (a)

December

1989

under

of Nigeria a ten

89

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AFRICAN REVIEW OF MONEY, FINANCE AND BANKING - 1/93

ensure effective and efficientimplementation of the People's Bank pilot project in the eight selected states; (b) provide thorough supervision and monitoring of the opera tions of the Bank to ensure that loans go only to those who are needy; (c) maintain the highest level of integrityand honesty in the operations of the Bank; (d) make ar
in the rangements tion of the scheme measures which thirteen States1 remaining with effect from January the success and 1990; Abuja, (e) for nation-wide that loans implementa given as out are ensure Bank

repaid for the benefit of other beneficiaries; (f) undertake all activities and take other
will ensure

tion for bringing financial help to the needy masses; and (g) carry out other relevant activities that may be assigned from time to time by the Federal MilitaryGovernment. During the pilotstage, eight States (Anambra, Benue, Cross River, Niger, Lagos, Sokoto,
Kano and the bank established. Federation Oyo) made benefitted from the scheme. and the and two bank At the end in each became of the of the era, twenty branches of were of the of oper up of six in Lagos From January 1990, study seven States remaining in all the States operational

of the People's

of Nigeria

an

institu

after a careful

modification

terim report on the activities of the bank submitted Force divided the country into eight zones ation, the Task Within each are branches of the Task Force. zone (headed centres. The man, Task Force was replaced Director and

Government by the Federal For ease Force. by the Task each headed by branch

of the in

by a member and managers)

No. 22 of 1990. The Managing Director is the chief executive of the bank while the Board
of Directors tional process charge Like the structure apart is the highest policy making exists at the moment, from the no formal organisa organ of the bank. Although but the key functionaries in the credit delivery General Manager in

Managing

Board of Directors by a nine member comprising seven other directors to the promulgation sequel

the chair of Decree

of operations, Grameen

Director include one Assistant Managing Zonal and Branch Managers Managers.

the People's Bank of Nigeria makes use of group lending. is to ensure of loans Prospective system high recovery granted. borrowers are required to organise themselves in groups of possibly similar trade. Each of 13 members with Chairman and Secretary must be duly registered group, consisting Bank, The essence of this with a neighbourhood centre operating under a branch of the bank. Loan requests are

1. There were then twenty-one States in Nigeria. Now the number has increased

to thirty.

90

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J.C. ANYANWU,U.B. UWATT - BANKING FOR THE POOR

sent

to the field officers

at the various

centres

who

then forward the requests Once

them and

who make

the respective recommenda

The branch evaluate managers managers. tions to the respective zonal managers for approval. disbursements more are made at the branches

branch

to the members

than five borrowers at a time. Subsequent of earlier beneficiaries. performance pend strongly on the repayment ers of the group are the last to receive loans under this scheme and dent ule, on their members' there repayment number performance. of times Provided a beneficiary the loans can get is no limit to the

are approved, of the group in batches of not to other members de disbursements requests However, this ie again are new repaid loans. the lead depen on sched

the loan

The bank usually verifies the type of business engaged in by a potential beneficiary
before The period quired teed a loan terms

The exercise is done by the field officers with the co-operation of the group leaders.
loan consist year and of 15 per cent interest loan per (formerly period and 5% per service person charge), of one a maximum maturity of five thousand

is granted

and

also

monitors

the

utilization

and

repayment

of the

loan.

naira (N5,000.00).
from any

Repayment is done weekly in small instalments. No collateral is re

beneficiary by the bank even though the loans are jointly guaran

loan

of the group. Co-operation of loan beneficiaries themselves by the members among and with the bank is ensured held between the bank's staff through regular meetings and the members of the various It is at such meetings that the group members groups. are informed of the bank concerning loans to them and the impor by the regulations tance of their co-operation. is empowered to recover the On the event to take all steps of the death including the bank concerned Apart has the sale of a beneficiary and serious default, of the assets of the business

money. also accepts deposits from the public urban expecially the under the

privileged Nigerians with accruable interest of up to 17 per cent. In addition, the bank
the Peoples' Bus scheme designed to facilitate transportation. Recently,

from lending,

the bank

bank also launched the People's Emergency Deposit Scheme (PEDS) which involves the use of mobile banks. Under the scheme the Mobile Banks, equipped with public
address

the product. The scheme has as its main objectives:

a)

system,

will go

round

the

market

places

with adapted

radio

commercials

of

their behalf;
the pooled resources investing level of returns for the benefits in approved of the unit holder;

pooling

financial

resources

from small

savers

and

management

of such

funds

on

b)

investment and

outlets

to achieve

a high

91

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AFRICAN REVIEW OF MONEY, FINANCE AND BANKING- 1/93

c)
The care

to stimulate development of the Nigerian capital market through mobilization of idle

funds scheme fees, and channeling is akin of books such into markets is also through designed viable investment the outlets. unit holder breakdown, others. 17 and The take rise interest which cost to unit trust, to enable equipment

of emergencies

relating

in school accruable

to personnel and unexpected is 15 per cent

development, farm hazards and can rise

to the unit holder

among to between

provided no withdrawal is made within three to six months. The People's

establishment of thirty four commercial branches throughout the Federation

18 per cent

Bank of Nigeria also intends to go into pure commercial banking withthe

before the

end of 1992. There will be one commercial branch in each state of the Federation in cluding the new Federal Capital Abuja and three in Lagos. In addition to this, the bank
will also trolled establish by the a satellite centre branches in each in the of the States. local government areas to be con commercial

4. The

The

PBN:

Evaluation of funds

of Performance

PBN's

sources

donations on fixed month

from state deposits balance

include subvention from the Federal Government of Nigeria, and individuals, and interest earned governments savings deposits with some in the country. commercial and merchant banks In a 15 as at 31st December, stood 1990 Government at N230 published million while in January donations 1992, stood subven at N1.419

sheet

tion from the Federal

million,savings deposits were N 13.829 million,and other liabilities amounted to N2.750 million, giving a total liabilityof N247.998 million. Within the same period, total assets of the bank stood at N245.790 million made up of N 137.696 million in cash and short-termfunds, N63.358 million in loans, N21.748 million in fixed assets and N22.988 million in other assets. Thus, the bank's loss for
the 15-months mostly rate to high ended 31st December costs of March 1990 and was N2.208 million. This loss is attributable administrative By the N20 end million facilities than low interest cosy infrastructural 1991 the bank's total funds amounted to N280 and other sources. When with

million made up of the N230 million Federal Government subvention, N30 million sav similar financial institutions in other developing countries and development finance in stitutions in Nigeria such as the Federal Mortgage Bank of Nigeria, Nigerian Industrial
Development Bank, etc. with resources running into billions of naira, one sees that the ings deposits, and from donations compared

chargeable.

92

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J.C. ANYANWU, U.B. UWATT - BANKING FOR THE POOR

PBN is clearly underfunded.

In terms 1,1989 of coverage to December of the 31,1989), bank, one observes 20 branches that during the pilot with a total of 131 satellite phase centres (October servic

ing these branches were commissioned (Solarin, 1990).

The bank

Benin (made up of Edo, Delta, Ondo, Oyo and Oshun); Jos (made up of Plateau, Bauchi and Benue); Kaduna (made up of Kaduna, Katsina, Sokoto and Kebbi); Kano (made up of Kano, Borno, Taraba and Adamawa); Abuja (made up of Abuja, Kogi, Nliger,and (made up of Enugu, Anambra, Imo and Abia). By March 31,1991, a total of 175 branches
had been established in Benin in Kano zone; branches branches total zone; made throughout Nigeria up of 27 branches 23 branches in Jos zone; 23 branches 18 branches had in Abuja zone; 23 branches with 160 in Lagos in Kaluna zone; zone; 21 20 Kwara); Port Harcourt (made up of Rivers, Cross River and Akwa-lbom); and Enugu

currently

operates

from eight

zones,

viz:

Lagos

(made

up of Lagos

and

Ogun);

in Port Harcourt of them

and 20 branches in Enugu zone (see table 1). However, by the end of July, 1991, the in the rural areas representing a ratio of eight (rural) to one (urban) (Solarin, 1991).
therefore, zones the number of branches rural areas appear where to be majority eight while favouring fairly evenly spread of the poor reside. among number of branches gone up to 180 branches established

zone;

Spatially, the

Also, by March 31, 1991, the bank's loan beneficiaries stood at 140,000 people made up of 84,000 females (60%) and 56,000 males (40%) (See table 1 forthe distribution).
At the loans rate

people (with more than 90% being poor), then the PBN can only succeed
to about one million people in ten years hence, the bank's impact

of 140,000

beneficiaries

every

18

months

in a country

of over

120

million

in granting
on the socio

economic life of the vast majority of poor Nigerians will hardly be significant.
In terms of disbursement and loan

was disbursed to 8,007 beneficiaries during the pilot phase. Fifty (50) weeks was the scheduled repayment period. The expected repayment at the
end ment of the pilot phase found rate that the of over was actual N 222,011.73 repayment but it was was it was a very encouraging revelation when N 251,311.30 which represented a repay

recovery,

we

observe

that

a total

of N5.6

million

113%.

In the first 12 months of its operation, the PBN disbursed N 138.259 million while M 118,894.140 million(86%) was recovered, leaving an outstanding loan of N 19,354.860 million (14%). Thus, additional disbursement over the amount recovered in that year 93

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Table 1 COVERAGE Zone Enugu Port-Harcourt Benin Kano Kaduna Jos Lagos Abuja Total OF THE PEOPLE'S BANK OF NIGERIA BY MARCH 1991 Numberof Branches 20 23 21 20 23 23 27 18 175 Numberof Loan Beneficiaries Male Female 9,022 7,170 7,120 6,298 5,225 5,912 11,460 3,793 56,000 19,030 10,701 8,786 6,110 6,175 8,314 20,686 4,190 84,000

Numberof States covered 4 3 3 4 4 4 5 3 30

Source: People's Bank of Nigeria,Quarterly Returns.

was N 19.354.860
months ended 31st

million (the same as outstanding loans (See table 2)). In the next six
March, 1991 the bank disbursed a loan amount of N 68.751 million

out of which M 59.469.615

Thus, by March 31, 1991

million (86.5%)
the cumulative

was recovered.
disbursement was N207 million with the

loan

cumulative recovery as N 178.363.755 million (86%) and an outstanding loan of H 28.662.445 million (14%) (see table 2). In a similar programme in India (The Working Women's Forum in Madras), the recov ery rate is between 90% and 95% (World Bank, 1990). In the case of the Grameen Bank Project in Bangladesh fromwhich PBN is modelled, the recovery rate is between 98% and 99% (Sadeque, 1986; Hossain, 1987; and Hossain and Asfar, 1988).
Table 2 PBN LOAN DISBURSEMENT Activity Credit Disbursed Credit Recovered AdditionalDisbursementover recovery CumulativeDisbursement CumulativeRecovery Outstandingloans Source: People's Bank of Nigeria,Quarterly Returns. AND RECOVERY (Nm) October 1989 September 1990 138.259 118.894140 19.35486 138.259 118.804140 19.35486 October 1990 March 1991 68.751 59.469615 9.281385 207.00 178.363755 28.662445

94

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J.C. ANYANWU,U B. UWATT - BANKING FOR THE POOR

With

or 13.83% of total disbursement (table 3) withmale borrowers having N 12.4 million(6%

of total having rowers). female Also, disbursement N 16.2 Though borrowers overdue loans million had or 15% (7.83% better of total of total loans to male borrowers) or 13% than and female borrowers bor the to sex, disbursement of total the 31, loans to female

respect

to overdue

loans,

by March

31,

1991

the

amount

stood

at M28.6

million

the difference

in performance repayment and

is not significant

with respect male 1991 and of total have

performance above loans as

borrowers. was the loans better N6.8 female million bor

for six months or 4.82%

at March

(or 3.3% of total disbursement) out of which the male borrowers had N 4 million (1.9%
of total rowers disbursement had N 2.8 Again, than of total of total show to male borrowers) or 2.26% borrowers million these their (1.4% figures male disbursement that the female to female repayment

borrowers). performance Overall,

counterparts.

banks in Nigeria (See, for instance, Anyanwu, 1991a, 1991b). Analysis in terms of distribution of PBN loans shows that during the pilot phase, the N5.6 million disbursed to 8,000 of beneficiaries were distributed as follows: farm
ers, fishermen, cattle rearers soap and makers, poultry garri farmers processors, (38%); petty traders bread bakers, industries comprising (30%); weavers cottage and pot

the fairly good rate could be attributed to group and bypass recovery lending of overwhelming and delay in loan sanction practice ing of the bureaucratic paperwork thus and recovery loan default that is the meat of other halting the vicious problem

makers (8%); and mechanics, capenters, electricians, hair dressers and cobblers (24%) (Solarin, 1990). However, table 4 shows the PBN's sectoral (and sex-wise) distributionof loans between October 1989 and March 31,1991. During the firstyear of its operation, the PBN grant ed N38.3 million (or 28%) to pettytraders; mechanics had N 26.3 million (18.3%); arti sans and craftsmen had M25.3 million (18.3%); cottage industries had W21.7 million (15.7%); agriculture had N17.9 million (13%) while the least share of M8.3 million (6%) went to transportation. During this period, no female had any loan
in the

male group were petty traders (39.09%) just as their male counterparts (32.5%). On the whole, while the male group had N55 million, the female group had W83.2 million. a total of N68.8 million with N28 million going to the males and M40.8 million going
to the females. During this period, the pattern of disbursement to the sectors (econom During the next six months of operation ending on March 31, 1991 the PBN disbursed

group

of mechanics

and

transporters.

The

largest

beneficiaries

among

the

fe

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Table 3 PBN: OVERDUE Type of Borrower LOANS BY TYPE OF BORROWERS BY MARCH 31, 1991 (Nm) Overdue Loan for 6 monthsand above Amount 4.0 1.9 6.9 Share of Loan 1.9 1.4 3.3

Loan Disbursed

Overdue Loans Amount Share of Loan 6.0 7.9 13.9

Male Female TOTAL

83.0 124.0 207.0

12.4 16.2 28.6

Source: People's Bank of Nigeria,Quarterly Returns.

ic activities) was similar to that of the firstyear of operation, and also with no female receiving any loan in the mechanic and transporters' groups (See table 4).
It is important disbursement trariwise, common to note since however, a large that agriculture was of Nigerians disbursed areas. This not given attention in PBN's in agriculture. are engaged loan Con

population

a large feature

of loans was percentage of urban and semi-urban to note

ting the PBN, that of discouraging rural-urban migration.

It is, however, gratifying that by the end of July 1991,

is a more to petty trading which one of the aims of set negates out of a total loan disburse

ment of N 191.91 million, N 134.2 millionor 70% went to the rural areas (Solarin, 1991). ptoms of the complex Nigerian disease: fraud, greed, ethnicity, the north-south syn and maladministration(Anim et al, 1991). In fact, the sweet drome, profligay, inefficiency, melodies that welcomed the PBN have turned into a cacophony as Nigerians hiss in tions that staggering amounts of the people's money which runs into several millions of naira had been misapplied and/or embezzled by some officials of the work. In fact, the Chairman of the Bank, Tai Solarin, had to resign in January 1992 over the Federal Government's inabilityto bring corrupt officials in the bank to book. Indeed, in April 1991, the Government had to sack the Implementation Task Force (ITF) set up in Oc
tober stead. 1989 Also to shepherd a three-man This was the audit sequel bank to take-off was to the and appointed to audit an of a board of directors ordered in its the committee ordered the accounts of the bank by disgust over the miasma of fraud that has enveloped the institution. There are allega In spite of the above apparent impressive performance, the PBN developed all the sym

nation-wide.

report

investigation

96

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J.C. ANYANWU,U.B. UWATT - BANKING FOR THE POOR

then Federal Ministryof Finance and Economic Development. The following could give
a glimpse a sum as to the state of affairs then.

ers had expected that out of the total of N 101.69040234

of N67.3 was bursement million ought N 41.9874748 to have million, been leaving disbursed as N 25.3125252

By October

15,

1990, loans.

the

national However,

million it gave the 8 zones,

actual dis for. million unaccounted

headquart

Table 4 PBN: DISBURSEMENT - MARCH 1991 OF LOANS BY ECONOMIC ACTIVITY (SECTOR) AND SEX, OCTOBER October 1990 - March 1991 Loan Share of Male (Nm) Sector Amt. Share (%) (Nm) (o/o) 8.9 4.0 12.7 19.9 10.0 13.3 68.8 13.0 5.9 18.4 29.0 14.5 19.2 100 1.8 4.0 3.1 3.3 2.5 13.3 28.0 6.4 14.3 11.0 11.6 8.9 47.8 100 Female Amt. Share (Nm) (o/o) 7.1 9.6 16.6 7.5 40.8 17.4 23.5 40.7 18.4 100 1989

October 1989 - September 1990 Economic Activity/ Sector Agriculture Transportation Artisansand Craftsmen Pettytraders Cottage industries Mechanics All Sectors Loan Share of Male (Nm) Sector Amt. Share (0/0) (Nm) (%) 17.9 8.3 25.3 38.7 21.7 26.3 138.2 13.0 6.0 18.3 28.0 15.7 19.0 100 3.6 8.3 5.8 6.2 4.8 26.3 55.0 7.0 14.97 10.64 11.2 8.8 47.39 100 Female Amt. Share (Nm) (o/o) 14.3 19.5 32.5 16.9 83.2 17.18 23.43 39.09 20.31 100

Source: People's Bank of Nigeria,QuarterlyReturns.

million of the amount disbursed (See table 5 for details). To worsen matters, there is in the manners of recording the books and in the submission of finan non-uniformity
cial returns how to the branches. the bank This makes reconciliation of branch million from and October head office ac

Unfortunately,

by April 1991,

the zones

had

only been

able

to render

account

on N9.735

counts as well as aggregation difficult. Thus, nobody could say with any degree of cer tober 1990 (Akinrinade, 1991).
tainty exactly spent N 130.92010254 1989 to Oc

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Table 5 PBN: PERFORMANCE Zone SUMMARY OF ACTIVITIES ZONE BY ZONE as at 15th October 1990 (H m) Returns

No. of Branches

Amountcollected by Task Force Member fromHead Office 15.86 14.19 14.60 1.14 15.74 15.10 13.83 1.35 15.18 12.27 .36 12.63 4.39 8.0 .59 8.59 101.69

AmountDisbursed by Task Force Member Actual Expected . Disbursement 9.93 2.98 9.23 3.79 7.51 4.08 1.77 2.70 11.5 8.0 9.5 8.0 9.5 7.5 7.5 5.8

Lagos Benin Jos (Repayment Rolled Over) Kaduna Kano (Repayment Rolled Over) Abuja (Repayment Rolled Over) Port Harcourt Enugu (Repayment Rolled Over) Sub Total

15 14 18 15 18 11 13 12

.72 .69 1.60 1.27 3.93 .79 .30 .43

116

41.99 29.15 71.22

67.30

9.735

Disbursed by Head Office Total Disbursementby the Bank Nation-wide Source: Newswatch,Vol. 13, No. 17, April22, 1991, p. 17. 5. Some From Recommendations discussion its noble and analysis, there We,

the above

is scope therefore,

for changes recommend

at the as

PBN

so

as

to enable

it realize

objectives.

follows:

a) The PBN has a set of worthwhile objectives but its current funding, expansion programme and operational modalities raise significant questions regarding its sur
there its self-sustenance, a self-sustaining financial institution. Thus, to ensure to annual subventions be a radical from funding the bank through departure will provide the bank's fund whose interest income the establishment of an endowment vival as should to ensure terest on its sustenance, loans is to be volume if the target in 1992. and spread, of about 500 branches and a 15% rate of in

loanable funds. In fact, a once-and-for-all endowment of N2 billion will be sufficient

met

b) To increase

its loan

the bank

and

the Government

request) should seek forfinancial assistance

from international financial institutions

(on the bank's

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J.C. ANYANWU, U.B. UWATT - BANKING FOR THE POOR

(See Nliam, 1991) such as the World Bank and its affiliates which can provide both aids (financial and material) and soft loans.
c) In the light of other expansion it may continue, expansion branch demands on government a more gradual funds, we recommend If the present of opening branches is allowed to pace strategy. An become an undue burden for the bank to fund and maintain. of no more than 25-50 more branches centres per annum be over the next to widen half the

a decade

is recommended as this is likely to permit a more effective operational

period can created

programme

control. Within the management area with the people. of contact

that should set out percentage sectoral credit allocations d) The bank's management favours the agricultural sector while at the same time reflecting national socio-economic that is biased towards priorities rather than the current loan disbursement arrangement

petty trading, thus contributing littleor nothing production-wise to the economy.

e) The Decree establishing the PBN did not reflectthe regulatoryneed of the bank which
revolves around its monitoring and supervision with particular reference to its ac and credit expansion behaviour which may have important countability consequences for overall macroeconomic as well as the protection of those who place management

their deposits with the bank. An easy way to take care of this in a specialized bank is to set up a regulatory unit forthe PBN in the Federal Ministryof Finance, whose
duties PBN's will be to provide bank examination and overall amended and and funds are safe deposits its continued existence or threaten this, the PBN Decree needs to be that PBN's services to ensure that supervisory credit operations do not endanger management. suitable provisions To ensure aimed at

macroeconomic to include

placing PBN's activities under the new regulatory body.

f) A more

effective loan recovery should be evolved. in order to avoid Thus, strategy care should be taken to ensure that borrowers are not made to under delinquency take repayment schemes which they cannot Greater use of flexible schemes keep. for repayments should be made to recover sooner from the relatively capital quicker Loan recoveries There could should be made also on a rising scale to correspond to the speed

income-generating activities compared with the slower-income-generating activities.

of in

come generating activity. In this way, capital could be more quickly recouped and
reinvested. ing the meaning of interest rates be the provision and charges of debt as well services explain counselling as the best way of financial

management.

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AFRICAN REVIEW OF MONEY, FINANCE AND BANKING - 1/93

g) A uniformaccounting system should be established forthe bank so as to avoid vari able accounting systems as hithertooperational. The design und use of forms should be centrally agreed at the head office while an accounting manual suitable for the
functions and services rendered by the bank should be undertaken.

h) For financial and expenditure control, when funds are released by the head office
to the zonal be rendered offices, by the it should branches

diture should be classified into different heads. Monthlyreturnsof expenditure should

to the head office on a regular basis.

clearly

indicate

the purpose

of the release

while

expen

For effective internal monitoring, an inspectorate unit and an internal audit should be established. The inspectorate unit should not be involved in funds disbursement but
should rather concentrate on examinations, verification and evaluation of func tions/performance.

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References Akinrinade, S. "Who Got What?: Zonal Co-ordinators Make Untidy Returns of Money Collected from Headquart ers", Newswatch, Vol. 13, No. 17, April 22, 1991, p. 16. Anim, E. et al., "Scam at Poor Man's Bank", Newswatch, Ibid, 13-22. Anyanwu, J.C., "Housing Finance in Nigeria: The Role of Domestic Financial Institutions", African Review of Money, Finance and Banking, No. 2, 1991a, 120-145. , "Public Financial Enterprises in Nigeria: The Case of the Nigerian Industrial Development Bank (NIDB)", in NES, Public Enterprises in Nigeria, NES Annual Conference, Sokoto, June, 1991b, 65-84. Federal Republic of Nigeria, People's Bank of Nigeria Decree No. 22, 1990. Hossain, M., Credit For Alleviation of Rural Poverty: The Experience of the Grameen Bank of Bangladesh, IF PRI and BIDS, July, 1987. and Afsar, R., Credit for Women: A Review of Special Credit Programmes in Bangladesh, Development Division, Bangladesh Institute of Development Studies, Dhaka, 1988. Newswatch Communications Ltd., Newswatch, Op. cit., p. 17. Human Resource

Nliam, E.C., Credit Delivery to the Underprivileged Nigerian Citizens: A Case Study of People's Bank of Nigeria, Unpublished M. Sc. (Banking and Finance) Project, Unversity of Ibadan, September, 1991. People's Bank of Nigeria, People's Bank of Nigeria Quarterly Returns, Various Issues. S. "The Rural Financial Market and the Grameen Bank Project in Bangladesh: An Experiment In In volving Rural Poor and Women in Institutional Credit Operations", Savings and Development, Vol. X, No. 2, 1986, 181-195. Solarin, T. "People's Bank of Nigeria, October-December 1989", in Jika A. (ed.), The People's Bank of Nigeria, Sadeque, Triumph Publishing Company, Kano, 1990, 7-9. , The Benefits of People's Bank to Rural Dwellers, Paper presented at a Symposium at Ijebu-East LGA, Ogun State, August, 1991. World Bank, World Development Report 1990, Oxford University Press, New York, 1990.

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AFRICAN REVIEW OF MONEY, FINANCE AND BANKING - 1/93

Abstract

The People's Bank of Nigeria (PBN), in its first15 months of operation, incurred a loss of N2.208 million withassets/liabilities of N245.790 million. In its 18 months of opera tion (October 1989 to March 1991), it had inadequate funds of N280 million with8 zones and 175 branches throughout the country. Withinthis period, 140,000 people (84,000 women and 56,000 men) benefitted fromits loans a number considered inadequate in the face of prevalent mass poverty in Nigeria. The cumulative loan disbursement as at March 1991 stood at N207 million while cu mulative loan recovery withinthe same period was N 178.363755 million (86%). Over due loans stood at N28.6 million (or 13.83% of total disbursement). petty trading dominated throughout the period. The situation was not made better by reports of fraud and financial improperty in the bank.
We, therefore, recommend increase in the bank's as well financial as resources dowment fund and international others. assistance the need an through for gradual branch en ex Unfortunately, less importance was accorded to agriculture in loan disbursement while

pansion, higher loan allocation to agriculture, a regulatory framework,and effectiveloan

recovery strategy, among

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J.C. ANYANWU,U.B. UWATT BANKING FOR THE POOR

LE CAS DE LA BANQUE POPULAIRE

DU NIGERIA

RESUME
Pendant ses

une perte de N2,208 millions avec un total de bilan de N245J90 millions. Au cours de ses 18 mois de vie (Octobre 1989-Mai 1991) elle a gere des fondsjnadequats qui
se chiffraient a N280 millions avec 8 zones et 175

premiers

15 mois

d'activite,

la Banque

Populaire

du Nigeria

a enregistre

ritoire national. Dans cette periode, 140.000 personnes

ont beneficie de ses prets hommes) de la pauvrete de masse prevalant un nombre au Nigeria. qu'on

agences

eparpillees

sur

tout le ter vis-a-vis

(84.000
considere

femmes et 56.000
inadequat

Le total des prets octroyes au mois de mars 1991 se chiffrait a N 207 millions et le recouvrement des prets total a la meme date etait de N178,363755 millions (86%). Les defaillances etaient de N28,6 millions (a savoir le 13,8% du total des prets octroyes).
Malheureusement, du credit de periode en ce qui concerne I'octroi des prets, la People's Bank of Nigeria bien plus que de son activite et la situation ne s'estpas amelioree le petit commerce a beneficie toute la pendant I'agriculture avec les nouvelles de fraudes

et d'illegalites financieres perpetrees a I'interieur de la banque.

Les Auteurs sous recommandent d'un fonds forme une augmentation des de dotation, une adequate ressources assistance financieres Internationale, de la ban et souli

que

le reseau des agences, gnent entre autre I'exigence d'elargir d'octroyer plus de credit au secteur de mettre en place un cadre de reglementation et une agricole, rigoureux des prets efficace. strategie pour le recouvrement

103

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