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BANKING FOR THE POOR: THE CASE OF THE PEOPLE's BANK OF NIGERIAAuthor(s): J.C. Anyanwu and U.B. UwattSource: African Review of Money Finance and Banking, No. 1 (1993), pp. 87-103Published by: Giordano Dell-Amore FoundationStable URL: http://www.jstor.org/stable/23024778 .

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BANKING FOR THE POOR: THE CASE OF THE PEOPLE'S BANK OFNIGERIA

J.C. AnyanwuCollege of Education, Nsugbe, Anambra StateU.B. UwattUniversity of Ibadan

1. IntroductionIn recent years public policies towards financial system and economic development haveshiftedaway from he old orthodoxyof financial repression (eg. subsidization ofprivatefinancial institutionsby government, imposing ceilings on interest rate, directed andrationed allocation of credit to approved sectors at low interest rate, etc. to that of financialliberalization). Here government intervention n the financial system is deemphasizedin favour of market determined interest rates and credit allocation. Incidentally, this concept offinancial liberalization has been firmlyntrenched inthe IMF/World Bank sponsored stabilization and Structural Adjustment Policies (SAPs).In Nigeria, the financial market deregulation and financial liberalization accompanyingthe adoption and implementation of the StructuralAdjustment Programme (SAP) since1986 has resulted in a rapid upsurge in the growth of traditional banking institutionssuch as commercial and merchant banks, and non-bank financial institutions such asfinance houses and stock broking firms. In addition, there has been an upward movement in interest rates. This high interest rate structure coupled with the collateral-basedoperational modalities of the commercial and merchant banks and the limited spreadof these banks to the rural areas despite many years of concerted effort to promoteruralbanking has made it mpossible for he under-privilegedNigerians engaged in smallscale but legitimate businesses to have access to bank credit. Consequently their ability to expand these businesses and thus reduce the burden of the structural adjustmentprogramme is greatly impeded.It is also important to note that at the instance of the Central Bank of Nigeria, the Financial System Review Committee in 1975 recommended and the Federal Governmentapproved a programme ofgeographical dispersal of bank branches particularly esignedto ensure the penetration of the rural areas by banks. The scheme which started in1977 ended its official thirdphase in 1989 (and established in 1991) with a total of765rural branches opened by 1990 out of a total allocated number of 766. Despite this impressive performance, most rural dwellers especially the low-income group cannot secure credit facilities from these commercial banks due to high costs of credit (particularly in a deregulated interest rate environment), lack of collateral security, high levelilliteracy, and low financial requests which commercial banks consider not worthwhileto extend given their high-risk. It was in an attempt to overcome this credit-scarcity constraintthat the People's Bank of Nigeria (PBN) Limited was established. The bank isa specialized financial institutionestablished by the Nigerian government to provide

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credit to the poor.The main purpose of this paper, therefore, is to evaluate the performance of the People's Bank of Nigeria within he two years of existence. Accordingly, the paper is divided into sections. Section two deals with the formation,aims and objectives of the People's Bank ofNigeria. In section three we look at the operational modalities of the bankwhile evaluation ofperformance is done in section four. Section five is devoted to policy recommendations.

2. Formation, Aims and Objectives of PBNThe People's Bank of Nigeria came into existence on October 1, 1989 during the 29thindependence anniversary broadcast of the President and Commander-in-Chief of thearmed forces of the Federal Republic ofNigeria, General IbrahimB. Babangida. Howeverthe commissioning of the first ranch of the bank at Ajegunle (a ruralslump settlementof petty businessmen and women in Lagos) two days later by the President and thefirstdisbursement of loans at the occasion marked the officialbeginning of bankingservices of PBN.The People's Bank of Nigeria derives its philosophical focus and operational modalities from the Grameen Bank of Bangladesh; a specialized financial institutionestablished by the government of that countryforproviding loans to the poor and upliftingtheireconomic conditions. The Grameen Bank is one (and perhaps the best example)of such institutions n developing countries directed at the poor. Others include Microfundin Philippines, Association forDevelopment ofMicroenterprises (ADEMI) in Dominican Republic; Small-scale Enterprises Programme in Calcutta, India; Saving Development Foundation inZimbabwe; WorkingWomen's Forum inMadras, India; Badan KreditKecamettan (BKK) and Kupedes both in Indonesia (World Bank, 1990).Generally, the People's Bank of Nigeria is seen as a strategy to ameliorate the sufferings of the masses by providing them with easy credit; curb mass unemployment atthe grassroot and encourage economic self reliance at the grassroot. Accordingly, itsobjectives as spelt out by government are to, among other things:a) Extend banking facilities to the poor people who do not have access to the creditfacilities available at commercial banks.b) Create opportunities for self-employment for the vast, unutilized and under-utilized

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manpower resources.c) Bring disadvantaged people together with the goal of some organisational formatswhich they can understand and operate.d) Eliminate exploitation by shylock money lenders.e) Help cushion some of the painful effects of SAP on poor sectors of the economy.f) Compliment government's efforts n improvingthe productive base of the economy and raising rural employment and income.g) Halt rural-urban migration, andh) To inculcate banking habits at the grassroots level with its attendant benefits forthe lower classes.In order to ensure the achievement of these objectives and to streamline the operations of the bank, it was given a legal status as a specialized financial institutionbyDecree No. 22 (People's Bank of Nigeria Decree 1990) of 30th July1990 and effectiveOctober 1, 1989. According to Section 2(1) of this decree, the functions of the bankinclude:a) the provision of basic credit requirements of the under-privileged Nigerians whoare involved inlegitimate economic activities in both urban and rural areas and who

cannot normally benefit from the services of the orthodox banking system due totheir inabilityto provide collateral security;b) the acceptance of savings from the same group of customers and make repaymentsof such savings together with any interests thereon, after placing the money, inbulk sums, on short term deposits with commercial and merchant banks.The main targets are the under-privileged Nigerians comprising road side mechanics,self-employed, plumbers and electricians, petty traders, small-scale farmers, poultryand other livestock keepers, truck pushers, petty tailors, dress makers, barbers, hairdressers, washer men and women, and other persons who need financial assistanceto improve their trade and economic well-being.

3. Operational Modalities of the PBN:The People's Bank of Nigeria started on an experimental basis between October andDecember 1989 under a ten member task force. The task force was expected to (a)

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ensure effective and efficient mplementation of the People's Bank pilot project in theeight selected states; (b) provide thorough supervision and monitoringof the operations of the Bank to ensure that loans go only to those who are needy; (c) maintainthe highest level of integrity nd honesty in the operations of the Bank; (d) make arrangements in the remaining thirteen States1 and Abuja, for nation-wide implementation of the scheme with effect from January 1990; (e) ensure that loans given out arerepaid for the benefit of other beneficiaries; (f) undertake all activities and take othermeasures which will ensure the success of the People's Bank of Nigeria as an institution forbringingfinancial help to the needy masses; and (g) carry out other relevantactivities that may be assigned from time to time by the Federal MilitaryGovernment.Duringthe pilot tage, eight States (Anambra, Benue, Cross River,Niger,Lagos, Sokoto,Kano and Oyo) benefitted from the scheme. At the end of the era, twenty branches ofthe bank made up of six in Lagos and two in each of the remaining seven States wereestablished. From January 1990, the bank became operational in all the States of theFederation after a careful study and modification by the Federal Government of the interim report on the activities of the bank submitted by the Task Force. For ease of operation, the Task Force divided the country into eight zones each headed by a memberof the Task Force. Within each zone are branches (headed by branch managers) andcentres.The Task Force was replaced by a nine member Board of Directors comprising the chairman, Managing Director and seven other directors sequel to the promulgation of DecreeNo. 22 of 1990. The Managing Director is the chief executive of the bank whilethe Boardof Directors is the highest policy making organ of the bank. Although no formal organisational structure exists at the moment, but the key functionaries in the credit deliveryprocess apart from the Managing Director include one Assistant General Manager incharge of operations, Zonal Managers and Branch Managers.Like the Grameen Bank, the People's Bank of Nigeria makes use of group lending.The essence of this system is to ensure high recovery of loans granted. Prospectiveborrowers are required to organise themselves in groups of possibly similar trade. Eachgroup, consisting of 13 members with Chairman and Secretary must be duly registeredwith 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.

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sent to the field officers at the various centres who then forward them who the respectivebranch managers. The branch managers evaluate the requests and make recommendations to the respective zonal managers for approval. Once the loan requests are approved,disbursements are made at the branches to the members of the group in batches of notmore than five borrowers at a time. Subsequent disbursements to other members depend strongly on the repayment performance of earlier beneficiaries. However, the leaders of the group are the last to receive loans under this scheme and this ie again dependent on their members' repayment performance. Provided the loans are repaid on schedule, there is no limit to the number of times a beneficiary can get new loans.The bank usually verifies the type of business engaged in by a potential beneficiarybefore a loan is granted and also monitors the utilization and repayment of the loan.The exercise is done by the field officers with the co-operation of the group leaders.The loan terms consist of 15 per cent interest (formerly 5% service charge), maturityperiod of one year and a maximum loan per period and per person of five thousandnaira (N5,000.00). Repayment is done weekly in small instalments. No collateral is required from any loan beneficiary by the bank even though the loans are jointly guaranteed by the members of the group. Co-operation of loan beneficiaries among themselvesand with the bank is ensured through regular meetings held between the bank's staffand the members of the various groups. It is at such meetings that the group membersare informed by the regulations of the bank concerning loans to them and the importance of their co-operation. On the event of the death of a beneficiary and serious default,the bank is empowered to take all steps including the sale of the assets of the businessconcerned to recover the money.Apart from lending, the bank also accepts deposits from the public expecially the underprivileged Nigerians with accruable interest of up to 17 per cent. In addition, the bankhas the Peoples' Bus scheme designed to facilitate urban transportation. Recently, thebank also launched the People's Emergency Deposit Scheme (PEDS) which involvesthe use of mobile banks. Under the scheme the Mobile Banks, equipped withpublicaddress system, will go round the market places with adapted radio commercials ofthe product. The scheme has as its main objectives:a) pooling financial resources from small savers and management of such funds ontheir behalf;b) investing the pooled resources in approved investment outlets to achieve a highlevel of returns for the benefits of the unit holder; and

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c) to stimulate development of the Nigerian capital marketthroughmobilization of idlefunds and channeling such into markets through viable investment outlets.

The scheme which is akin to unit trust, is also designed to enable the unit holder takecare of emergencies relating to personnel development, equipment breakdown, risein school fees, cost of books and unexpected farm hazards among others. The interestaccruable to the unit holder is 15 per cent and can rise to between 17 and 18 per centprovided no withdrawal is made within three to six months.The People's Bank of Nigeria also intends to go intopure commercial banking withtheestablishment of thirty four commercial branches throughout the Federation before theend of 1992. There will be one commercial branch in each state of the Federation including the new Federal Capital Abuja and three in Lagos. In addition to this, the bankwill also establish a satellite centre in each of the local government areas to be controlled by the commercial branches in the States.

4. The PBN: Evaluation of Performance

The PBN's sources of funds include subvention from the Federal Government of Nigeria,donations from state governments and individuals, savings deposits and interest earnedon fixed deposits with some commercial and merchant banks in the country. In a 15month balance sheet as at 31st December, 1990 published in January 1992, subvention from the Federal Government stood at N230 million while donations stood at N1.419million, avings deposits were N13.829 million, nd other liabilities amounted to N2.750million, giving a total liabilityof N247.998 million.Within the same period, total assets of the bank stood at N245.790 millionmade upof N137.696 million in cash and short-termfunds, N63.358 million in loans, N21.748million in fixed assets and N22.988 million in other assets. Thus, the bank's loss forthe 15-months ended 31st December 1990 was N2.208 million. This loss is attributablemostly to high administrative costs and cosy infrastructural facilities than low interestrate chargeable. By the end of March 1991 the bank's total funds amounted to N280millionmade up of the N230 million Federal Government subvention, N30 million savings deposits, and N20 million from donations and other sources. When compared withsimilar financial institutions n other developing countries and development finance institutions in Nigeria such as the Federal Mortgage Bank of Nigeria, Nigerian IndustrialDevelopment Bank, etc. with resources running into billions of naira, one sees that the

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PBN is clearly underfunded.In terms of coverage of the bank, one observes that during the pilot phase (October1,1989 to December 31,1989), 20 branches with a total of 131 satellite centres servicing these branches were commissioned (Solarin, 1990).The bank currently operates from eight zones, viz: Lagos (made up of Lagos and Ogun);Benin (made up ofEdo, Delta, Ondo, Oyo and Oshun); Jos (made up of Plateau, Bauchiand Benue); Kaduna (made up of Kaduna, Katsina, Sokoto and Kebbi); Kano (madeup of Kano, Borno, Taraba and Adamawa); Abuja (made up ofAbuja, Kogi, Nliger, ndKwara); Port Harcourt (made up of Rivers, Cross River and Akwa-lbom); and Enugu(made up ofEnugu, Anambra, Imo and Abia). By March 31,1991, a total of 175 brancheshad been established throughout Nigeria made up of 27 branches in Lagos zone; 21branches in Benin zone; 23 branches in Jos zone; 23 branches in Kaluna zone; 20branches in Kano zone; 18 branches in Abuja zone; 23 branches in Port Harcourt zone;and 20 branches in Enugu zone (see table 1). However, by the end ofJuly, 1991, thetotal number of branches had gone up to 180 branches with 160 of them establishedin the rural areas representing a ratioof eight (rural) to one (urban) (Solarin, 1991).Spatially, therefore, the number of branches appear to be fairly evenly spread amongthe eight zones while favouring rural areas where majority of the poor reside.Also, by March 31, 1991, the bank's loan beneficiaries stood at 140,000 people madeup of 84,000 females (60%) and 56,000 males (40%) (See table 1 for the distribution).At the rate of 140,000 beneficiaries every 18 months in a country of over 120 millionpeople (withmore than 90% being poor), then the PBN can only succeed in grantingloans to about one million people in ten years hence, the bank's impact on the socioeconomic life of the vast majorityof poor Nigerians will hardly be significant.In terms of disbursement and loan recovery, we observe that a total of N5.6 millionwas disbursed to 8,007 beneficiaries during the pilot phase.Fifty 50) weeks was the scheduled repayment period. The expected repayment at theend of the pilot phase was N 222,011.73 but it was a very encouraging revelation whenit was found that the actual repayment was N 251,311.30 which represented a repayment rate of over 113%.In the first12 months of its operation, the PBN disbursed N 138.259 million whileM 118,894.140 million 86%) was recovered, eaving an outstanding loan ofN 19,354.860million 14%). Thus, additional disbursement over the amount recovered in that year

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Table 1COVERAGE OF THE PEOPLE'S BANK OF NIGERIA BY MARCH 1991Zone Number of Numberof Numberof Loan BeneficiariesStates covered Branches Male FemaleEnugu 4 20 9,022 19,030Port-Harcourt 3 23 7,170 10,701Benin 3 21 7,120 8,786Kano 4 20 6,298 6,110Kaduna 4 23 5,225 6,175Jos 4 23 5,912 8,314Lagos 5 27 11,460 20,686Abuja 3 18 3,793 4,190Total 30 175 56,000 84,000Source: People's Bank ofNigeria,QuarterlyReturns.

was N 19.354.860 million the same as outstanding loans (See table 2)). In the next sixmonths ended 31st March, 1991 the bank disbursed a loan amount of N 68.751 millionout of which M59.469.615 million (86.5%) was recovered.Thus, by March 31, 1991 the cumulative loan disbursement was N207 million with thecumulative recovery as N 178.363.755 million (86%) and an outstanding loan ofH 28.662.445 million (14%) (see table 2).In a similar programme in India (The Working Women's Forum in Madras), the recovery rate is between 90% and 95% (World Bank, 1990). In the case of the GrameenBank Project in Bangladesh fromwhich PBN is modelled, the recovery rate is between98% and 99% (Sadeque, 1986; Hossain, 1987; and Hossain and Asfar, 1988).Table 2PBN LOAN DISBURSEMENT AND RECOVERY (Nm)Activity October 1989 October 1990

September 1990 March 1991Credit Disbursed 138.259 68.751Credit Recovered 118.894140 59.469615AdditionalDisbursement ver recovery 19.35486 9.281385CumulativeDisbursement 138.259 207.00CumulativeRecovery 118.804140 178.363755Outstandingoans 19.35486 28.662445Source: People's Bank ofNigeria,QuarterlyReturns.

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

With respect to overdue loans, by March 31, 1991 the amount stood at M28.6 millionor 13.83% of total disbursement (table 3) with male borrowers having N 12.4 million 6%of total disbursement or 15% of total loans to male borrowers) and female borrowershaving N 16.2 million (7.83% of total disbursement or 13% of total loans to female borrowers). Though the difference in performance is not significant with respect to sex, thefemale borrowers had better repayment performance than the male borrowers.Also, overdue loans for six months and above as at March 31, 1991 was N6.8 million(or 3.3% of total disbursement) out of which the male borrowers had N 4 million 1.9%of total disbursement or 4.82% of total loans to male borrowers) and the female borrowers had N 2.8 million (1.4% of total disbursement or 2.26% of total loans to femaleborrowers). Again, these figures show that the female borrowers have better repaymentperformance than their male counterparts.Overall, the fairly good recovery rate could be attributed to group lending and bypassing of the bureaucratic practice of overwhelming paperwork and delay in loan sanctionand recovery thus halting the vicious loan default problem that is the meat of otherbanks 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: farmers, fishermen, cattle rearers and poultry farmers (38%); petty traders (30%); cottageindustries comprising soap makers, garri processors, bread bakers, weavers and potmakers (8%); and mechanics, capenters, electricians, hair dressers and cobblers (24%)(Solarin, 1990).However, table 4 shows the PBN's sectoral (and sex-wise) distribution f loans betweenOctober 1989 and March 31,1991. During the firstyear of itsoperation, the PBN granted N38.3 million or 28%) to pettytraders; mechanics had N 26.3 million 18.3%); artisans and craftsmen had M25.3 million (18.3%); cottage industries hadW21.7 million 15.7%); agriculture had N17.9 million 13%) while the least share ofM8.3 million 6%) went to transportation. During this period, no female had any loanin the group of mechanics and transporters. The largest beneficiaries among the female group were pettytraders (39.09%) just as their male counterparts (32.5%). Onthe whole, while the male group had N55 million,the female group had W83.2 million.During the next six months of operation ending on March 31, 1991 the PBN disburseda total of N68.8 million with N28 milliongoing to the males and M40.8 milliongoingto the females. During this period, the pattern of disbursement to the sectors (econom

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Table 3PBN: OVERDUE LOANS BY TYPE OF BORROWERS BY MARCH 31, 1991 (Nm)Type of Borrower Loan Disbursed Overdue Loans Overdue Loan for6 months nd above

Amount Share of Loan Amount Share of LoanMale 83.0 12.4 6.0 4.0 1.9Female 124.0 16.2 7.9 1.9 1.4TOTAL 207.0 28.6 13.9 6.9 3.3Source: People's Bank ofNigeria,QuarterlyReturns.

ic activities) was similar to that of the firstyear of operation, and also with no femalereceiving any loan in the mechanic and transporters' groups (See table 4).It is important to note however, that agriculture was not given attention in PBN's loandisbursement since a large population of Nigerians are engaged in agriculture. Contrariwise, a large percentage of loans was disbursed to petty trading which is a morecommon feature of urban and semi-urban areas. This negates one of the aims of setting the PBN, that of discouraging rural-urban migration.It is, however, gratifying to note that by the end of July 1991, out of a total loan disbursement ofN 191.91 million,N 134.2 millionor 70% went to the rural areas (Solarin, 1991).In spite of the above apparent impressive performance, the PBN developed all the symptoms of the complex Nigerian disease: fraud, greed, ethnicity,the north-southsyndrome, profligay, nefficiency,nd maladministration Animet al, 1991). Infact,the sweetmelodies that welcomed the PBN have turned into a cacophony as Nigerians hiss indisgust over the miasma of fraud that has enveloped the institution. There are allegations that staggering amounts of the people's money which runs into several millionsof 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 inJanuary 1992 over the FederalGovernment's inabilityto bring corrupt officials in the bank to book. Indeed, in April1991, the Government had to sack the Implementation Task Force (ITF) set up in October 1989 to shepherd the bank to take-off and appointed a board of directors in itsstead. Also a three-man audit committee was ordered to audit the accounts of the banknation-wide. This was sequel to the report of an investigation ordered by the

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then Federal Ministry f Finance and Economic Development. The followingcould givea glimpse as to the state of affairs then. By October 15, 1990, the national headquarters had expected that out of the total of N 101.69040234 million itgave the 8 zones,a sum of N67.3 million ought to have been disbursed as loans. However, actual disbursement was N 41.9874748 million, leaving N 25.3125252 million unaccounted for.

Table 4PBN: DISBURSEMENT OF LOANS BY ECONOMIC ACTIVITY (SECTOR) AND SEX, OCTOBER 1989- MARCH 1991

October 1989 - September1990 October 1990 - March 1991EconomicActivity/ Loan Share of Male Female Loan Share of Male FemaleSector (Nm) Sector Amt. Share Amt. Share (Nm) Sector Amt. Share Amt. Share(0/0) (Nm) (%) (Nm) (o/o) (%) (Nm) (o/o) (Nm) (o/o)Agriculture 17.9 13.0 3.6 7.0 14.3 17.18 8.9 13.0 1.8 6.4 7.1 17.4Transportation 8.3 6.0 8.3 14.97 4.0 5.9 4.0 14.3 - Artisans ndCraftsmen 25.3 18.3 5.8 10.64 19.5 23.43 12.7 18.4 3.1 11.0 9.6 23.5Petty raders 38.7 28.0 6.2 11.2 32.5 39.09 19.9 29.0 3.3 11.6 16.6 40.7Cottageindustries 21.7 15.7 4.8 8.8 16.9 20.31 10.0 14.5 2.5 8.9 7.5 18.4Mechanics 26.3 19.0 26.3 47.39 - - 13.3 19.2 13.3 47.8 - -AllSectors 138.2 100 55.0 100 83.2 100 68.8 100 28.0 100 40.8 100Source: People's Bank ofNigeria,QuarterlyReturns.

Unfortunately, by April 1991, the zones had only been able to render account on N9.735million of the amount disbursed (See table 5 fordetails). To worsen matters, there isnon-uniformityn the manners of recording the books and in the submission of financial returns to the branches. This makes reconciliation of branch and head office accounts as well as aggregation difficult. hus, nobody could say withany degree ofcertainty how exactly the bank spent N 130.92010254 million from October 1989 to October 1990 (Akinrinade, 1991).

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Table 5PBN: PERFORMANCE SUMMARY OF ACTIVITIES ZONE BY ZONE as at 15th October 1990 (H m)Zone No. of Branches Amount ollectedbyTask Force Member AmountDisbursedbyTaskForce Member ReturnsfromHead Office Actual Expected. DisbursementLagos 15 15.86 9.93 11.5 .72Benin 14 14.19 2.98 8.0 .69Jos (Repayment 18 14.60 9.23 9.5 1.60Rolled Over) 1.1415.74Kaduna 15 15.10 3.79 8.0 1.27Kano (Repayment 18 13.83 7.51 9.5 3.93RolledOver) 1.3515.18Abuja (Repayment 11 12.27 4.08 7.5 .79RolledOver) .3612.63Port Harcourt 13 4.39 1.77 7.5 .30Enugu (Repayment 12 8.0 2.70 5.8 .43RolledOver) .598.59Sub Total 116 101.69 41.99 67.30 9.735

Disbursed byHead OfficeTotal Disbursementbythe Bank Nation-wide 29.1571.22Source: Newswatch,Vol. 13, No. 17, April 2, 1991, p. 17.5. Some RecommendationsFrom the above discussion and analysis, there is scope for changes at the PBN so asto enable it realize its noble objectives. We, therefore, recommend as follows:a) The PBN has a set of worthwhile objectives but its current funding, expansionprogramme and operational modalities raise significant questions regarding its survival as a self-sustaining financial institution. Thus, to ensure its self-sustenance, thereshould be a radical departure from funding the bank through annual subventions to

the establishment of an endowment fund whose interest income will provide the bank'sloanable funds. In fact, a once-and-for-all endowment of N2 billion will be sufficientto ensure its sustenance, if the target of about 500 branches and a 15% rate of interest on loans is to be met in 1992.

b) To increase its loan volume and spread, the bank and the Government (on the bank'srequest) should seek forfinancial assistance from nternationalfinancial institutions98



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(See Nliam, 1991) such as the World Bank and its affiliates which can provide bothaids (financial and material) and soft loans.c) In the light of other demands on government funds, we recommend a more gradualbranch expansion strategy. If the present pace of opening branches is allowed to

continue, it may become an undue burden for the bank to fund and maintain. Anexpansion programme of no more than 25-50 branches per annum over the next halfa decade is recommended as this is likelyto permit a more effective operationalmanagement control. Within the period more centres can be created to widen thearea of contact with the people.

d) The bank's management should set out percentage sectoral credit allocations thatfavours the agricultural sector while at the same time reflecting national socio-economicpriorities rather than the current loan disbursement arrangement that is biased towardspetty trading,thus contributing ittle r nothing production-wise to the economy.

e) The Decree establishing the PBN did not reflect he regulatoryneed of the bank whichrevolves around its monitoring and supervision with particular reference to its accountability and credit expansion behaviour which may have important consequencesfor overall macroeconomic management as well as the protection of those who placetheirdeposits withthe bank. An easy way to take care of this in a specialized bankis to set up a regulatory unitforthe PBN in the Federal Ministry f Finance, whoseduties will be to provide bank examination and supervisory services to ensure thatPBN's deposits and funds are safe and that PBN's credit operations do not endangerits continued existence or threaten overall macroeconomic management. To ensurethis, the PBN Decree needs to be amended to include suitable provisions aimed atplacing PBN's activities under the new regulatory body.

f) A more effective loan recovery strategy should be evolved. Thus, in order to avoiddelinquency care should be taken to ensure that borrowers are not made to undertake repayment schemes which they cannot keep. Greater use of flexible schemesfor repayments should be made to recover capital sooner from the relatively quickerincome-generating activities compared withthe slower-income-generating activities.Loan recoveries could be made on a rising scale to correspond to the speed of income generating activity. In this way, capital could be more quickly recouped andreinvested. There should also be the provision of debt counselling services explaining the meaning of interest rates and charges as well as the best way of financialmanagement.

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g) A uniform ccounting system should be established forthe bank so as to avoid variable accounting systems as hitherto perational. The design und use of forms shouldbe centrally agreed at the head office while an accounting manual suitable for thefunctions and services rendered by the bank should be undertaken.

h) For financial and expenditure control, when funds are released by the head officeto the zonal offices, it should clearly indicate the purpose of the release while expenditure should be classified into different eads. Monthlyreturnsofexpenditure shouldbe rendered by the branches to the head office on a regular basis.

For effective internalmonitoring,an inspectorate unit and an internal audit should beestablished. The inspectorate unit should not be involved in funds disbursement butshould rather concentrate on examinations, verification and evaluation of functions/performance.

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ReferencesAkinrinade, S. "Who Got What?: Zonal Co-ordinators Make UntidyReturns of Money Collected fromHeadquart

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, IFPRI and BIDS, July, 1987. and Afsar, R., Credit for Women: A Review of Special Credit Programmes in Bangladesh, Human Resource

Development Division, Bangladesh Institute of Development Studies, Dhaka, 1988.Newswatch Communications Ltd., Newswatch, Op. cit., p. 17.Nliam, E.C., Credit Delivery to the Underprivileged Nigerian Citizens: A Case Study ofPeople's Bank ofNigeria,

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.Sadeque, 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", inJika A. (ed.), The People's Bank ofNigeria,

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, OgunState, August, 1991.World Bank, World Development Report 1990, Oxford University Press, New York, 1990.

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AbstractThe People's Bank ofNigeria (PBN), in its first15 months ofoperation, incurred a lossof N2.208 millionwithassets/liabilities of N245.790 million. In its 18 months ofoperation October 1989 to March 1991), it had inadequate funds of N280 million with8 zonesand 175 branches throughout the country. Within thisperiod, 140,000 people (84,000women and 56,000 men) benefitted from ts loans a number considered inadequatein the face of prevalent mass poverty in Nigeria.The cumulative loan disbursement as at March 1991 stood at N207 million while cumulative loan recovery within he same period was N 178.363755 million 86%). Overdue loans stood at N28.6 million (or 13.83% of total disbursement).Unfortunately, less importance was accorded to agriculture in loan disbursement whilepetty tradingdominated throughout the period. The situation was not made better byreports of fraud and financial improperty n the bank.We, therefore, recommend increase in the bank's financial resources through an endowment fund and international assistance as well as the need for gradual branch expansion, higher loan allocation to agriculture,a regulatoryframework, nd effective oanrecovery strategy, among others.

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J.C. ANYANWU,U.B. UWATTBANKING FOR THE POOR

LE CAS DE LA BANQUE POPULAIRE DU NIGERIA

RESUMEPendant ses premiers 15 mois d'activite, la Banque Populaire du Nigeria a enregistreune perte de N2,208 millions avec un total de bilan de N245J90 millions. Au coursde ses 18 mois de vie (Octobre 1989-Mai 1991) elle a gere des fondsjnadequats quise chiffraient a N280 millions avec 8 zones et 175 agences eparpillees sur tout le territoire national. Dans cette periode, 140.000 personnes (84.000 femmes et 56.000hommes) ont beneficie de ses prets un nombre qu'on considere inadequat vis-a-visde la pauvrete de masse prevalant au Nigeria.Le total des prets octroyes au mois de mars 1991 se chiffrait N 207 millions et lerecouvrement des prets totala la meme date etait de N178,363755 millions (86%). Lesdefaillances etaient de N28,6 millions (a savoir le 13,8% du total des prets octroyes).Malheureusement, en ce qui concerne I'octroi des prets, le petit commerce a beneficiedu credit de la People's Bank of Nigeria bien plus que I'agriculture pendant toute laperiode de son activite et la situation ne s'estpas amelioree avec les nouvelles de fraudeset d'illegalites financieres perpetrees a I'interieur de la banque.Les Auteurs recommandent une augmentation des ressources financieres de la banque sous forme d'un fonds de dotation, une adequate assistance Internationale, et soulignent entre autre I'exigence d'elargir le reseau des agences, d'octroyer plus de creditau secteur agricole, de mettre en place un cadre de reglementation rigoureux et unestrategie pour le recouvrement des prets efficace.

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