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TROUBLED MFBS RISKS CLOSURE IN 2011

By NBF News
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By Amaka Abayomi
As the January 2011 deadline given to the 121 microfinance banks (MFBs) with provisional licenses to meet the specific requirements by the Central Bank of Nigeria (CBN) draws nearer, speculations are rife that some may not get CBN's nod to carry out microfinance banking services in 2011.

The CBN had on October 22 and 25, 2010, published the names of the 121 of the 224 MFBs that were granted provisional approval for new licenses, subject to the fulfillment of some specific requirements within three months.

A CBN source who spoke under anonymity told Vanguard 'Those MFBs that are given deadline have to do so before the end of January 2011, or they stand the risk of forfeiting their provisional licenses.'

Among the requirements for the granting of new operating licences to the 121 MFBs are capitalisation of prior deposits for shares and the new capital injection to bring the shareholders' fund unimpaired by losses to the prescribed minimum of N20m; good corporate governance, sound risk management system and strong internal controls to forestall avoidable losses; closure of unapproved branches, cash centres and customer meeting points; adoption of a true microfinance model.

'At the expiration of the deadline, a comprehensive pre-licensing examination and capital verification will again be conducted before the new license will be granted to those found eligible. By the end of January, these MFBs will know their fate, and those unable to meet the requirement will be liquidated while those that scaled through will continue in business,' the CBN source said.

The CBN had said that those granted provisional approvals have made fresh capital injection and made significant loan recovery.

The CBN noted that the closure of the remaining 103 MFBs will immediately be brought to conclusion by the Nigerian Deposit Insurance Corporation (NDIC) and the process of liquidation of the affected MFBs and payment of insured deposits will commence.

The NDIC, on December 6, commenced the payment of NI.6 billion claims to customers of MFBs whose licenses were revoked.

The CBN pointed out that measures such as review of the Microfinance Policy Framework, introduction of a new operational template to benchmark microfinance banking, capacity building to develop a critical mass of knowledge and skill, human resources as well as examining the possibility of introducing a Micro, Small and Medium Enterprise (MSME) Fund to catalyse a sustainable development of the microfinance space, are being put in place to ensure that MFBs live up to their responsibility of fostering financial inclusion, fighting poverty and empowering low-income and vulnerable groups.