These are not the best of times for the nation's embattled financial system. The capital market is yet to emerge from the abyss that unrestrained insider dealings and calamitous share price manipulations plunged it into.

Commercial banks are still waddling in the financial tsunami triggered by the infamous margin facility in the capital market and the fallout of fraudulent and inept risk management. Microfinance banks (banks of the poor) are struggling with a catastrophic misalignment of priorities.

Under normal circumstances, no one really expected the crisis currently rocking the nation's microfinance system. In Bangladesh, the country that inspired the micro-credit system in many parts of the world, the operators of the system believe that the poor are the best debtors in the world. They almost always pay their debts. Debt recovery in the poor man's bank is therefore devoid of the horrendous task of endless litigation that the rich have imposed on risk managers in conventional banks in Nigeria.

Debtors to microfinance banks have little or no place to hide when the creditor comes calling for his money. Their places of abode are not fortified. So they always endeavour to repay their loans. Besides, they have very few options when it comes to credit facilities. For that reason they take pains to please their creditor, lest their only lifeline is jettisoned.

On the other hand, the rich, who form the prime clientele of conventional banks, live in fortresses which the creditor may find it difficult to penetrate when the credit facility becomes toxic. They have lots of avenues they could run to, when they feel like not paying back their loans.

In a country like Nigeria, which has continued to treat the development of credit bureau as something alien to the system, the dubious ones among the rich have developed the fraudulent habit of dumping their accounts in banks where they are heavily indebted and switching to new ones where they enjoy fresh credit facilities.

The poor do not have that luck; so loan recovery in microfinance banks should not escalate to the point that the commercial banks were when Sanusi Lamido Sanusi took over as governor of the Central Bank of Nigeria (CBN). Ironically, that is the picture that the operators of the system are painting as an excuse for the virtual collapse of hundreds of microfinance banks in recent times.

There are speculations that out of 890 microfinance banks in the system, about 250 are in varying degrees of distress. Some have completely shut their doors against depositors while others are dribbling them with lame excuses for not being able to honour their commitments.

While the operators of the system are hiding under the lame excuse of poor loan recovery for their failure, a close watch of the system reveals two major reasons for the financial asphyxiation gripping the nation's grassroots credit system. The first is inept management.

Most of the microfinance banks were set up by people who rose to middle and top management positions in the conventional banking system. These are people who had their contacts with the rich when they were in the commercial banks. They opened their microfinance outfits with the hope that, at least, a segment of the business of their big-time clients in the conventional banking system would feed the microfinance outfit.

That philosophy informs the location of their headquarters, the quality of the edifice and the furniture in them. In Lagos, the posh Adeniyi Jones community hosted a rather disproportionate percentage of the microfinance banks in Ikeja local government.

Even if the target of the operators of the banks were the Mallams manning the gates of the rich in that community, the imposing structures that housed their headquarters in the community would almost certainly repulse most of their clients. Of course, no one expects the handful of security guards in that community to sustain the business set up in such imposing structures.

From the location of their headquarters and the opulent nature of the edifices housing them, it was clear that the microfinance banks were set for a clash of interest with commercial banks.

It was just a matter of time when it became clear that the commercial banks had keen competitors in the microfinance banks. Besides the conventional bank mentality of the operators of the microfinance banks, their recruitment policy was a reflection of the bourgeois concept of their business.

The distress in the mainstream banking system which triggered huge rationalisation of banking personnel provided the microfinance system with a cheap reservoir of experienced conventional bank managers who had basically no idea of the operation of a micro-credit system.

They were all recruited into the microfinance banks, where they premised their marketing strategies on conventional banking concepts. Their first target was the rich client they cultivated in their previous calling.

To convince the rich to deposit in a poor man's bank, the microfinance marketers dangled deposit rates as high as 20 per cent on funds as low as N5 million. That was at a time when conventional banks would hardly pay 13 per cent for deposits as high as N5 billion. Those who swallowed the poorly packaged bait of the microfinance banks are now counting their losses.

The poor, who are the bedrock of the microfinance system, became the first casualty of that misplaced priority. Rather than fashioning out strategies on how to mop up idle funds at the grass roots, they were busy drawing up strategies for a rather unwinnable contest for a chunk of the middle segment of the market with conventional banks. They all abandoned their primary constituency - the grass roots.

That misconception also informed their recruitment policy. Instead of brilliant school certificate holders who could be motivated with lower remuneration commensurate with the scope of the clientele, their marketing corps were studded with female university graduates decked out in skimpy suits. To make them attractive to the wrong targets set for them, the microfinance banks endeavoured to equip some of them with posh cars. The system was therefore set for the precipice.

To worsen a bad situation, some of them embarked upon ambitious expansion programmes with depositors' funds. When it was time to pay back, the vaults were empty.

The senseless misadventure of the microfinance banks could have been halted if the regulator was on ground to check their excesses. Ironically, most of the calamities occurred when the CBN had its hands full with the fallout of the cruel manipulation of the capital market by operators of conventional banks. No one was really watching the antics of the operators of the poor man's banks.

At that time anyone could just walk in and obtain a microfinance banking licence and do whatever he wanted with it. Some did not even care to obtain licences because they knew they could swindle people for months before anyone cared to know that they were con men.

The absence or inaction of the regulator is the second reason for the failure of the microfinance banks. The CBN is not equipped to monitor and regulate the activities of well over 890 microfinance banks strewn across the landscape. Operators of the so-called wonder banks know this perfectly well. That explains the determination to abandon their primary target for the middle segment of the market.

Ironically, the federal government is still ruminating on who and how to regulate the poor man's bank. Someone even floated the idea of outsourcing the regulatory function of microfinance banks. That probably demonstrates the level of levity with which credit to the grass roots of the economy and the crucial task of mopping up huge idle funds wasting away under pillows are being treated.

In an economy where 70 per cent of the population is wallowing in poverty, microcredit deserves the prior attention of the rulers of the land. The fight against poverty would commence in earnest the day we give the poor man's bank the attention it deserves.