Microfinance Bank Updated List 2022: (+ how to apply guide)

microfinance bank

In the world today, poor people have been traditionally excluded from formal financial services. But through innovative financial structures, such as group lending, microfinance institutions have been able to address the challenges. Moreover, they are able to achieve this by lending to the poor services like microcredit, micro-savings, microloan, and more. So, this article contains a lot of promising content on functions of microfinance banks, loans, and how to apply for the loans. Therefore, read through to the end of this article for the latest updates on this topic.

Microfinance Definition

Microfinance is a form of loans granted to individuals or groups of low income who don’t have access to other financial services.

You can also refer to microfinance as microcredit, meaning small loans offer to poor clients lacking access to credit. However, this is to help them start up a small business. Basically, three features distinguish microfinance from other formal financial products which include:

  • The smallness of loans and savings.
  • Absence of collateral.
  • The simplicity of operation.

Mostly, microfinance help in promoting economic development, employment, and the growth of a nation. Also, it helps the poor to manage their finances more effectively by taking advantage of economic opportunities.

Read Also: What is Business: Definition, Concept and Basic Tips.

Microfinance Bank

Microfinance banks are institutions established to offer assistance to individuals and small-scale businesses to obtain small credit or loan facilities.

Loan facilities of microfinance are given for the following reasons, business, assets procurement, Agriculture, Educational purposes, etc. Therefore, individuals and businesses can apply for Microfinance loans as long as they meet the requirements provided by the bank.

Functions of Microfinance Bank

One of the factors that can hinder the growth of the business or completely destroy it is lack of financial backup. Therefore, in other to tackle this issue of financial lack, microfinance banks were established. They help small business owners with microloans as a means of assistance to run or grow their business. Below are some common functions of microfinance banks:

#1. They grant loans in its smallest unit

The primary functions of microfinance banks are to provide microloans to individuals or groups in need of it. But these individuals or groups must meet all of the requirements for acquiring such a loan.

#2. They help to alleviate poverty

The government’s primary objective for alleviating poverty is to provide job opportunities and provide income-generating means for businesses. Therefore, microfinance banks are the major players in this aspect as they provide credit facilities to individuals and businesses. This makes the functions of microfinance banks much important in the poverty alleviation of a particular country.

#3. They create employment opportunities

The individuals, groups, and businesses provided with loan facilities will in turn engage the services of other people. Thereby providing employment opportunities like secretaries, receptionists, sales officers, cleaners, etc, for other people in their businesses.

#4. They help to increase both small and micro businesses

Microfinance banks make provisions for people with business ideas to bring their dreams to reality. Gone are the days when people think business is only for the rich and influential. Now, anyone can walk into any microfinance bank for a loan to start a business.

#5. Promotion of agricultural production and development

Microfinance banks make provision of credit facilities to farmers. These farmers get these loans for buying modern-day farming equipment such as tractors, plough, etc.

Read More: List Of Government Grants For Individuals

Microfinance Bank Loan

In business, sometimes you need a little more capital to expand your operation and meet your goals. So, MFB loans are there to help you maintain and grow your business. Hence, there are various types of loans granted by the microfinance banks, these include the following:

  • Individual Loan
  • Group Loan
  • School Improvement Loan
  • School Fees Loan
  • Small Enterprise Loan
  • Asset Finance Loan
  • Working Capital Loan
  • Consumer Loan

Note, each of these microfinance bank loans has its own requirements but has no collateral attachment.

List Of Microfinance Banks In Nigeria

Research has proved that there are over 1015 MFB officially registered and approved by CBN to provide microfinance loans. But, below are the top 11 of these microfinance institutions in Nigeria you should know.

1. ADDOSSER Microfinance Bank Limited

2. LAPO Microfinance Bank

3. Mainstreet Microfinance Bank Nigeria

4. Accion Microfinance Bank Limited

5. AB Microfinance Bank Nigeria

6. Fina Trust Microfinance Bank

7. Microfinance Mutual Trust

8. FINCA Microfinance

9. Fortis Microfinance Bank Plc

10. Rehoboth Microfinance Bank

11. Nirsal Microfinance Bank

See Also: List Of Federal Government Agriculture Grants.

LAPO Microfinance Bank

LAPO microfinance bank is one of the great and successful micro-financial institutions in Nigeria since the late 80s. They have become a household name in Oyo, Kwara, Lagos, and Ogun State. Hence, the bank has helped over one million entrepreneurs and individuals across Nigeria. In 2010, LAPO MFB obtained approval from the Central Bank of Nigeria (CBN) to operate a regulated microfinance bank. However, LAPO was licensed as a national microfinance bank in 2012 to undertake microfinance banking activities in Nigeria.

LAPO’s main goal is to create and develop small businesses into a profitable business in Nigeria. Thus, it provides entrepreneurs with amazing money lending and microfinance services. If you talk of a microfinance bank that gives listening ears to the needs of its seasoned and potential clients you talk of LAPO.

Moreover, they are aimed at reducing poverty with a pro-poor movement which is done by empowering low-income individuals. This they do socially and economically by giving individuals access to sustainable financial services. They offer unsecured loans of up to NGN 500,000 for small businesses and NGN5,000,000 for small and Medium-scale Enterprises.

LAPO MFB’s engagement in microfinance is much more than business as usual. It is about the development of people, particularly women. Meanwhile, the bank is governed by the board of directors and the management team.

Read More: Finance Companies: Best Picks For Any Business.

Nirsal Microfinance Bank

Nirsal microfinance bank is a CBN licensed institution offering credit facilities for many purposes in Nigeria. These purposes include Agricultural loans, Microloans, SME loans, and Asset Financing. They offer these loans at a competitive rate with large loans always available for individuals who are in need of financial services.

Basically, extensive paperwork is needed to access larger loans at Nirsal microfinance bank. You will also need a guarantor for some loans and the individual seeking these loans must attend compulsory training. Moreover, to gain access to any form of a loan at Nirsal microfinance bank, you must possess the following requirements:

  • Letter of employment
  • Staff identity card
  • Payslip
  • 6 months statement of account
  • Other forms of identification (National Identity card, international passport, etc)
  • Utility bill
  • 2 passport photographs
  • Guarantor form
  • 6 months other bank account statement.
  • Letter of confirmation of appointment/employment.
  • Every direct debit is placed on the customer’s account.
  • Execution of dud cheque indemnity form.
Read Also: Invoice Factoring: All You Need Explained + Loan Options.

How To Apply For MFB Loans In Nigeria

The interest rate on Microfinance loans ranges from 5%-6% depending on the loan size. Meanwhile, the tenure of the loan depends on the loan type. And this tenure may range from 1-3 months, 4-6 months, and 4-12 months respectively. However, the maximum maturity date is 18 months which only applies to businesses who are granted up to 5 million naira credit facilities.

Hence, to apply for microfinance bank loans in Nigeria, the following three major factors should be considered:

  • Customer must have at least 6 months active and serviced bank account. This is to prove creditworthiness to the bank.
  • Basically, every individual seeking MFB loans is advised to distinguish his personal account from a business account for proper accountability.
  • For Small and Medium Scale Enterprises, the business must be active for at least one year. Also, the business must have operates from the same location for at least six months.

Documents Required When Applying For a Microfinance Loan

Generally, any individual seeking a microfinance loan in Nigeria must provide the following documents.

  1. Loan application form
  2. Excellent Business Proposal (for SMEs)
  3. Letter of Application (for individuals)
  4. Valid means of identification (National I.D card, International Passport, Driver’s License)
  5. Copy of recent utility bill
  6. 4 recent passport photographs
  7. Evidence of the business location
See Also: World Bank Grants: All You Need To Know.

Conclusion

MFB has served and still serving as machinery to governments. As it has been a means of promoting economic development and growth. Research has proved that MFB has played a vital role in providing job opportunities and supporting small scale businesses. They have created many means of poverty alleviation in general. So, as a small business owner seeking a way to grow your business, MFB should be your best option.

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