Microfinance banks appraise CBN’s proposed ‘recapitalisation’ of banks

Central bank of Nigeria (CBN)
Central bank of Nigeria building

A few days after the Governor of the Central Bank of Nigeria, Godwin Emefiele, indicated a proposed recapitalisation of banks as part of his policy direction in his second tenure, the Lagos chapter of the National Association of Microfinance Banks, has said that product innovation, best practices, and corporate governance are essential ingredients in sustaining the growth of banks.

These were the highlights of the association’s communiqué at the end of a two-day strategic retreat for MD/CEOs of microfinance banks held in Abeokuta last weekend.

The retreat with the theme; “Post recapitalisation, sustainable growth, opportunities, and threats” was an intensive knowledge sharing experience between the CEOs of MFBs based in Lagos and the research and academic teams, fintech firms as well as regulatory authorities.

According to the statement sent to PREMIUM TIMES, the chairman of the Lagos Chapter of the MFBs, Omololu Fatunbi, in his opening remarks, emphasised the need for the MFBs to build on existing synergies within the industry that will enhance their capacity.

In his presentation, one of the keynote speakers, Onafowokan Oluyombo of the Lagos Business School, while analysing the global trend in the financial services space, demonstrated that opportunities for collaboration between the MFBs and other financial services, stakeholders are yet to be fully maximised. These opportunities, he said, include micro-pensions, micro-housing and micro-insurance.

He proffered solutions to cushion the biting effect of the proposed re-capitalisation.

These include mergers and acquisitions of MFBs, sale to strategic partners, cutting back on excessive expansion and developing individual niche markets, amongst others.

Mr Oluyombo cautioned the MFB CEOs to deal with insider abuse among their boards and staff ”now before recapitalization, so it will not become a problem in the future”.

He advised the MFBs to depend less on foreign funding/loans ”because of the unpredictable forex rates which can threaten their financial base”.

The Central Bank, in its presentation, told the MFBs that it would rather assist the MFBs ”when they move towards a settlement bank not set up a settlement bank for them”.

The CBN’s representative, Mr Adelana, warned that there will not be any intervention fund for MFBs with above 40 per cent liquidity.

He advised them to use their funds lodged in commercial banks.

The apex bank also used the occasion to assess the impact of MFBs on providing access to credits, concluding that from available data, MFBs in Nigeria cumulatively disbursed loans in excess of N1 trillion for 2017. It said this figure is expected to increase in 2018.

The NDIC, in its submission, noted the need for improved governance framework among the MFBs ”as a way to sustaining the value creation in the long term”.

Representatives from the Fintech Community, led by Uwa Agbonile of Infoware and Emeka Emetarom of Appzone, showed the latest advances in technology and how the MFBs can leverage these tools to enable them to enhance efficiency levels.

With more than 200 MFBs in Lagos, the annual retreat is organised to enable industry players to come together to review policy initiatives and work collectively towards finding solutions to common challenges.


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