Microfinance banks have urged the Central Bank of Nigeria to extend the deadline given to them to comply with the Revised Microfinance Policy Framework, which prescribes new capital requirements.
The South West Zone, National Association of Microfinance Banks, in a statement made available to our correspondent, called for a one-year extension, saying the December 31, 2012 deadline was not feasible.
The statement signed by the Chairman of the zone, Mr. Olufemi Babajide, stated that the sub-sector was not attractive to existing and new investors in view of the economic meltdown that hit it in 2008 and the revocation of licences in 2010.
He said, “We have no problem with capitalisation, it is a continuous process in all sectors, including the banking industry. Categorisation is also a welcome development, but the deadline of December 31, 2012 was not feasible. We want the deadline to be extended till December 31, 2014.
“Mergers and acquisitions, and outright sales are going on in the sub-sector, but the pace is slow in view of lack of funds and the need to carry out due diligence, which requires time. By the year 2014, the CBN support fund, NIRSAL Fund and other donor funds would have been disbursed to MFBs. This will make the sub-sector very attractive to investors.”
According to Babajide, under the NIRSAL programme, farmers have already been paired with various branches of MFBs, and if such branches are closed, it will be a setback for the programme.
He pointed out that the setback would compound the low productivity in the agricultural sector.
He said, “The Rural Agricultural Programme has already started with the branches of MFBs. If they are closed down, colossal losses will be recorded by farmers, cooperative societies, the host communities and MFBs.
“Other initiatives that the branches of the MFBs have signed on such as the United Nations Development Programme Solar Power and Oando Gas will automatically collapse.”
Babajide added, “Loans have been disbursed by the various branches to customers, whose tenors vary from 30 days to 720 days; the loans will automatically result into bad debts if such branches are closed.
“Also, Nigerians have been employed to man the branches and if they are closed, those people will automatically lose their jobs. Branch closure will reduce the reach-out to extend financial services to the poor and under-banked in Nigeria.”
According to the CBN’s Revised Microfinance Policy Framework, all MFBs that have elected to remain unit MFBs are required to close any existing branches/cash centres, subject to prior approval of the CBN in writing and adequate notification to existing customers, who should be advised to transfer their accounts to the MFB’s Head Office, while dissenting customers should be settled.
The CBN had said in a circular signed by the Director, Other Financial Institutions Supervision Department, CBN, Mr. Olufemi Fabanwo, that microfinance banks that failed to comply with the framework by December 31, 2012 was a punishable offence, adding that it was a ground for revocation.