Despite the huge non-performing loan portfolio that have been hampering the operations of financial institutions in the country, microfinance banks are enjoying very high repayment rates as loan default rate is said to be the lowest in that industry.
Chief Operating Officer of Fortis Microfinance Bank Plc, Mr Jero Omare-Ogah, told LEADERSHIP that loan repayment rate in microfinance banking was as high as 98 per cent making the highest within the financial industry.
Omare-Ogah noted that the model operated by most microfinance banks makes it very difficult for creditors not to repay their loans.
According to him, while the commercial banks operate on past due obligation (PDO), which means they wait till the loan expires before swinging into action on recovery, the microfinance banks use Portfolio At Risk (PAR), which makes it possible to swing into recovery process once one instalment payment is missed.
"You can have up to 98 or 99 per cent repayment rate if your methodology is right. Microfinance Banks operate the Portfolio At Risk (PAR), once one instalment payment is missed, the whole loan is at risk, and we immediately swing into recovery. Our repayments are fantastic because our methodology is right," Omare-Ogah said while stressing that the poor people always pay back their loans.
The Fortis MFB COO also commended the National Assembly for early passage of the 2013 budget.
"I was both amazed and impressed. I can't remember when something like this ever happened in the past. It just means that the right thoughts would get things done properly. The executive and the legislature seem to have woken up to their responsibility and this is essentially what we are asking for. Just do things the way they should be done and you are sure to see the right results.