MFB OPERATORS HOPE FOR BETTER FORTUNES IN 2011

By Amaka Abayomi
Notwithstanding the challenges that bedevilled the microfinance bank industry in 2010, microfinance banks' operators are optimistic that 2011 would be a year filled with better business opportunities as a result of the reforms by the regulatory bodies.

In year 2010, the microfinance bank industry experienced severe shake-up leading to the revocation of the operating licenses of 103 microfinance banks by the Central Bank of Nigeria (CBN). The regulatory hammer followed special and target examinations of MFBs by the CBN and Nigeria Deposit Insurance Corporation (NDIC),  which were  in response to numerous petitions from depositors complaining about their inability to access their funds in some MFBs and other reports indicating that some MFBs had closed their doors.

The examination among other things revealed that  most MFBs  had not  invested five per cent of their deposits in treasury bills, as required by the CBN. It also revealed that  most MFBs resorted to investing depositors' fund in fixed assets with and as a result  most of them had  fixed assets above the regulatory  limit of 20 per cent of their shareholders' fund,  while and the ratio of non-performing loans to total loans of most MFBs was above 2.5 per cent which resulted to poor credit management and loss of assets.

In addition to the axing the 103 MFBs, the apex bank, in other to correct some of the observed lapses organised certification examination programme for chief executives of MFBs, while the NDIC in other to maintain public confidence in the industry, commenced payment of the insured deposits of the closed 103 banks.

Speaking on the direction of CBN's policy for the industry, a CBN director, who pleaded anonymity, said, the CBN said there will be tighter regulatory processes and moral suasion will no longer continue as MFBs that fail to do what they are licensed to do will be penalized.

'This is to ensure the eradication of abuse of office and positions due to the zero tolerance we are harping on. Though 2010 was a fair year for MFBs as there were more credit extensions and more depositors, but the CBN is certain that 2011 will produce more effective and well focused MFBs that will concentrate on their core functions.'

Similarly, Enugu-based Umuchinemere Pro-Credit Microfinance Bank Nigeria Limited (UPMFB) expressed hope that  good things will happen in the sector in 2011.

'Given the events of last year, we hope that 2011 will fare better and those MFBs in business will do better. We hope to have good business opportunities, be able to improve the wellbeing of the poor and generally do better than we have ever done.'

For the Managing Director of Meridian MFB, Mr. Innocent Ezama, the implementation of the reforms would create room for progress in 2011.

'2011 will definitely be a better business year for the sector, especially as the CBN and NDIC have started implementing the banking reforms in the sector. Also, there are more information available to customers than before and this will help them make better choices.

'MFBs should plan to double their operations in 2011 so as to deliver better services to customers, increase their share capital, profit and customer base.'

Noting that easy access to credit would have prevented some of the challenges operators faced in 2010, the Managing Director, Gobarau MFB, Alhaji Mustapha Yar'Adua, called for the establishment of the Microfinance Development Fund (MDF) to facilitate quick service delivery.

'Considering the certification programme, policy review and closure of some unsound MFBs, the prospect for 2011 is bright because all these would move us forward. The establishment of the MDF would go a long way in easing the liquidity constrains that a lot of MFBs are facing.

'I strongly believe this year would be better because, despite as bad as it may sound, the revocation of the licenses of some MFBs has made us sit up and carry out our duties appropriately. Presently, my bank is talking with 2 other MFBs on the possibilities of merging so as to form a stronger bank that would offer viable financial services to people in the 34 LGAs of Kastina State.

With most MFBs instilling good corporate governance and competent boards, improved judgment by MFBs' management, improved credit administration, and reducing the level of non-performing loans (NPLs), 2011 promises to be a very bright and fruitful year for microfinance sector.