Nigeria Content Online

The Central Bank has assured customers who have deposits in closed microfinance banks that they will be compensated.

Mohammed Abdullahi, Head, Corporate Communications of
the Bank, said “Let me assure Nigerians that no depositor would lose
their money in the 224 microfinance banks that were closed down by the
Central Bank.

“This is so because of the guarantee of the payment
of not more than a N100,000 to each of the depositors as provided by
the insurance scheme offered by the Nigeria Deposit Insurance
Corporation, NDIC,” he said.

“What this means is that every customer of the
microfinance banks involved in the current exercise would be paid a
maximum of N100, 000.

“For those who have more than N100, 000 deposited in
their accounts with these banks, you would recall that these 224 banks
have a portfolio of nonperforming loan exposure amounting to about N20
billion and as the Central Bank has said, we are going to assist them
to aggressively recover these loans.”

He also stated that even at that, some of the
microfinance banks have properties and collateral which could be sold
in order to meet up with the payment of the customers affected.

“What this means is that at the end of the day, no
depositor would lose his/her money as a result of the actions taken by
the Central Bank of Nigeria”.

Apt intervention

Experts have commended the move of the Central Bank
to restore sanity to the microfinance industry when, last month, it
announced that it was revoking the operating licences of 224
microfinance banks that were found to be ‘terminally distressed’ and
‘technically insolvent’ and/or had closed shop for at least six months
after a target examination was conducted on 820 MFBs across the country.

The Central Bank confirmed that the industry had been
confronted with numerous challenges since the launch of the
Microfinance Policy Framework in December, 2005. A significant number
of the microfinance banks (MFBs) were deficient in their understanding
of the microfinance concept and the methodology for delivery of
microfinance services to the target groups.

Experts have, however, identified the problems of
microfinance banks in Nigeria to include under capitalisation,
extremely high levels of non-performing loans, insider lending, lack of
transparency, inexperience and supervision, meagre capital base, loss
of customers’ confidence, and high overhead cost. They have also
expressed fears that the sector might collapse if the operators and
regulators did not change their strategy.

With more than half of the adult population unable to access retail
banking services, the introduction of microfinance banking by the
Central Bank of Nigeria (CBN) was welcomed by Nigeria’s development
partners and the general populace. The Central Bank spokesperson says
the regulatory body would not hesitate to take further action on the
remaining microfinance banks, as supervision is continuous.