DBN Advocates Sustainability Banking for Microfinance Banks

Microfinance Banks

As Nigeria and global communities continue to grapple with effects of climate depletion and economic uncertainties enforced by the COVID-19 pandemic, Development Bank of Nigeria (DBN) has urged Microfinance Banks (MFBs) and its other Participating Financial Institutions (PFIs) to improve their sustainability efforts and become more responsive to their social and ecological environment.

This was the thrust of deliberations at a recent webinar session themed Creating a sustainability community of Practice for Nigerian Microfinance Banks which was organised by DBN for MFBs and PFIs.

The initiative is focused on further deepening DBN’s efforts to increase awareness on sustainability issues, and also positively influence its Participating Financial Institutions (PFIs) Sustainable Development Goals (SDG) focused initiatives and operations.

DBN Chief Operating Officer, Mr Bonaventure Okhaimo, in his welcome address said there is increased global attention on social impact and contribution of business to their environment and society. He explained that the webinar session is to initiate a conversation around sustainability initiatives and implementation strategies for financial institutions in Nigeria.

“Currently, the overall awareness of sustainability and its transitions for the microfinance ecosystem has not been clearly articulated in Nigeria due to the fact that most MFBs regard lending as the most essential service to be rendered to end-lenders.

“This session is designed to enable PFIs and DBN affiliated MFBs to have a more robust proposition about sustainability and will open them up to myriad advantages, including external funding, generation of deeper trust with stakeholders and legitimization of operations,” he said.

Delivering her keynote address, Special Adviser to CBN Governor on Sustainability, Dr Aisha Mahmoud, stated that deliberations on emerging issues of sustainability are important for the financial ecosystem.

According to her, MFBs, by virtue of their mandate, are already practising the social pillar of sustainability by lending to the underserved sectors of the economy, but have to focus more on the environmental impact of their lending by looking into the activities and operations of their investees through a sustainability lens. She added that today’s successful businesses are those that integrate sustainability in their operations.

“We cannot ignore the environmental pillar because it is as important as the social pillar. Due to our way of unsustainable consumption and production, we are constantly depleting the natural capital.

“We need to shift our growth pathway from the current trajectory to the one that improves the quality of human life while living within the carrying capacity of the planet earth.

“Going by feedback, companies always think sustainability is an additional cost to the business, but we need a shift from that perception because sustainability is a win-win situation that connects people, planet and the economy.

“Studies show businesses that integrate sustainability well outperform those that do not, as it lowers the cost of capital, results in better operational performance and positively influences the stock price,” she said.

In her remarks, DBN Sustainability Specialist, Lolade Awogbade, who spoke on sustainability benefits for MFBs, said sustainability is more important in these times of pandemic coupled with economic instability, and it is essential that there is an overall understanding of the influence MFBs have on communities and environments which they serve.

She added that investing in social and environmental sustainability initiatives will not only help finance companies in fulfilling their social mission but also differentiate them from competitors, give access to new market segments, provide access to new funding and improve their brand and corporate image.

“A study conducted by European Journal of Sustainable Development, the primary objective of Microfinance has largely been economic, but in recent years, the focus has shifted to a more social or developmental objective.

“In addition, there is a new entrance with the concept of Green Microfinance which entails providing low or moderate-income individuals with loans and technical assistance to help them procure and set up green or environmental friendly products and technology,” Awogbade said.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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