THE now defunct Royal Bank is considering downgrading to a microfinance institution (MFI) as the bank plans to embark on a restructuring programme mired in controversy, NewsDay has learnt. According to the bank’s court papers opposing a Reserve Bank of Zimbabwe High Court application seeking for a final order to liquidate the financial institution,... 

THE now defunct Royal Bank is considering downgrading to a microfinance institution (MFI) as the bank plans to embark on a restructuring programme mired in controversy, NewsDay has learnt.

According to the bank’s court papers opposing a Reserve Bank of Zimbabwe High Court application seeking for a final order to liquidate the financial institution, Royal Bank, which surrendered its operating licence last July due to capital constraints, wants to bounce back into the financial services sector.

In its discussion document titled: Royal Bank Limited Proposed Restructuring and Recapitalisation, the commercial bank last month engaged local external auditors PFK Chartered Accountants as financial advisors to craft its comeback bid.

The bank, which according to the documents owned land and buildings valued at $4,8 million, contends that it needed to restructure to settle the $3,7 million debt owed to its major creditors.

“Having considered the challenges faced by Royal Bank, both financially and in terms of market capitalisation, PFK have assessed the various options available to Royal Bank,” reads the document in part.

“In this regard, it is proposed that Royal converts its banking licence to microfinance licence. The capital requirement for microfinance (institutions) is manageable compared to banking licence. This will also allow Royal Bank adequate time to rebuild its brand and image. Microfinance organisations enjoy better margins than commercial banks.”

As part of Royal Bank’s restructuring programme, PFK also advised that the bank can also restructure its balance sheet through conversion of major current liabilities into equity or long debt through a scheme of arrangement.

The financial advisor also proposed that Royal could also raise funds through issue of equity shares and convertible debentures, with the funds to be applied against the repayment of the bank’s depositors and other liabilities, including the provisional liquidators costs.”

Funds raised from the private placement, the PFK advised, would also be used to roll out the proposed MFI.

Last year, the central bank raised the minimum capital levels for MFIs to $5 million from $1 million in a bid to minimise systemic risks in the banking sector.

With Royal converting into an MFI, could this be a case of jumping from the frying pan to the fire?

Already the central bank has during the past year closed two deposit accepting MFIs for breaching the Banking Act.

Experts say, low disposable incomes and marginal salary adjustments by some companies on the back of a rising cost of living, has forced the public to rely on MFIs which have less stricter borrowing requirements compared to traditional banks.

Royal Bank was re-licenced in October 2010 and granted a two-year grace period to meet the then $12,5 million minimum capital requirements.

The bank, however, failed to raise the capital.

SOURCE: News Day Zimbabwe

By Providence Obuh, Vanguard To improve the transport sector, the Lagos State Microfinance Association (LSMA) will assist artisans including the Bus Conductors Association of Nigeria (BCAN). Commissioner, Lagos State Ministry of Commerce and Industries, Mrs. Olusola Oworu said this during the inauguration and assessment of the state’s chapter of... 

Dele Oyekanmi, the Chairman, Ikeja Branch of the National Association of Microfinance Banks, on Friday urged the CBN to improve its capacity to build micro finance sub-sector. Oyekanmi said in Lagos that operators in micro finance sub-sector required more training in view of growing sophistication of their operations. He said that their operations... 

A leading indigenous microfinance company, Payflex, has re-launched its financing service operations with a call on government to support micro-finance companies. The non-bank financial institution consequently pledged to continue to register itself as a formidable force in the financial institution with the provision of affordable and accessible... 

By Dias Nyesiga, East African Business Week Kigali — Micro Finance Institutions (MFIs) here have been asked to provide more affordable financial services to people living in rural areas. The Executive Secretary of Association of Microfinance Institutions in Rwanda-AMIR Rita Ngarambe said that MFIs play a vital role as providers of banking facilitates... 

By Dias Nyesiga, East African Business Week

Kigali — Micro Finance Institutions (MFIs) here have been asked to provide more affordable financial services to people living in rural areas.

The Executive Secretary of Association of Microfinance Institutions in Rwanda-AMIR Rita Ngarambe said that MFIs play a vital role as providers of banking facilitates by being flexible and offering products tailored for rural populations.

“There is market for MFIs in rural areas, what is needed now is to design products that are suitable for the rural poor and also go down to the ground and open their branches,” she told East African Business Week.

Many MFIs have been criticised for not stepping up to help increase the percentage of people using banking facilities.

“With our financial sector structure, MFIs and Saccos should be established closer to the populations, with more flexible products than banks such as providing loans of few amounts and at lowest rates,” Job Opar, a consumer Protection Consultant said.

Accoridng to Finscope Survey 2012 , 72% of Rwandan adults (about 3.2 million) have or use financial products, with 1.3 million Rwandans currently financially excluded while the rate of Rwandans with savings went up to 68% from 54% in 2008.

MFIs have been criticised for having the highest interest rates which range from 16%- 26 %. Long bureaucratic procedures has also been highlighted for loan processing, which affects credit access mainly to the rural folk who cannot read and write.

“If the staff at MFIs have the capacity to either interpret or write loan requirements and agreement in a language their clients understand, I think that would be part of an affordable service provision and would quicken inclusion,” Opar said.

Jessica Massi, an expert in the micro finance sector, said that MFIs have managed to establish themselves closer to people

She however said they still face challenges in capacity building, high operational costs and lack of awareness among people on financial products available at MFIs. “Most staff at MFIs don’t have enough expertise in financial products, risk and loan management which is a big challenge,” she said

Ngarambe however noted that their association, together with development partners has started helping MFIs build the capacity of their staff in risk and loan management and product designing which has in turn minimised the non-performing loans.

According to the Rwanda Central Bank figures the micro finance sector recorded a reduction in their non performing loans ratio from 12% to 8.5%, an indication that the sector is steadily growing.

By Obinna Chima, This Day Live Notwithstanding the country’s position as Africa’s most populous country, KPMG has disclosed that only about 20 per cent of the population is banked. The foremost audit, financial and tax advisory firm stated this in a report titled: ‘Africa Banking Industry Customer Satisfaction Survey,’ for April 2013,... 

By Obinna Chima, This Day Live

Notwithstanding the country’s position as Africa’s most populous country, KPMG has disclosed that only about 20 per cent of the population is banked.

The foremost audit, financial and tax advisory firm stated this in a report titled: ‘Africa Banking Industry Customer Satisfaction Survey,’ for April 2013, made available to THISDAY Tuesday.

It however stated that two-thirds of the country’s population “have never banked at all before.”
In a bid to increase access to financial services, the Central Bank of Nigeria (CBN) had last year launched the Financial Inclusion Strategy (FIS).

The FIS is a concerted attempt to increase access to a range of financial services such as payments, savings, and bring more people into the banking system. The apex bank had identified lack of access to financial services as a challenge to the country’s growth.

Continuing, the KPMG report pointed out that the Nigerian banking industry is made up of 20 banks with nearly 6,000 branches, most of which are concentrated in the urban areas. It also identified the concentration of banks in urban areas as a factor that contributes to the low level of banking penetration.

It explained: “Nigeria’s banking sector is expected to grow from about $117 billion in 2011 to more than $168 billion in 2015 (a CAGR of around 10 per cent). The sector has recently experienced a number of regulatory changes including a repeal of universal banking licenses and the promulgation of more stringent regulations by the country’s central bank which is aiming to reduce soaring books of non-performing loans and stamp out severe breaches of corporate governance.

“However, with the establishment of the Asset Management Corporation of Nigeria (AMCON) to purchase toxic assets of banks and recapitalise troubled banks, some stability has returned to the sector leading rating agency Standard & Poor’s (S&P) to upgrade the sector in 2012 to a positive outlook due to the country’s improved asset quality, capitalisation and corporate governance.”

With 77.9 per cent, the report ranked Guaranty Trust Bank Plc emerged top among the first 10 ‘Most Customer-focused Banks’ in the country. It was closely followed by Zenith Bank Plc with 77.7 per cent and Stanbic IBTC with 76.1 per cent. Others on the list were Diamond Bank (75.7 per cent), Fidelity Bank (75 per cent), Standard Chartered (74.8 per cent), First City Monument Bank Plc (74.4 per cent), Sterling Bank (73.9 per cent) and Access Bank (73.1 per cent).

“With ATMs becoming almost ubiquitous in Nigerian cities, it is not surprising that it has been the fastest growing channel in recent years. Almost eight in 10 customers surveyed use the ATM and nearly two thirds of these people visit an ATM on a weekly basis with cash withdrawal and balance enquiry amongst the most common transactions customers perform via the ATM.

“However, despite the proliferation of new channels in recent years, our findings show that adoption of other alternate channels is still comparatively low with very few respondents saying they use internet banking (7 per cent), Point of Sale (PoS) (6 per cent), telephone banking (5 per cent) and mobile payments (2 per cent),” it added.

By Prosper Makene, IPP Media Umoja Trust of Tanzania (UTT) has launched its microfinance division to provide financial solutions to individuals, small and medium entrepreneurs (SMEs) and savings and credit co-operative (SACCOS). UTT Chief Operations Officer James Washima said that the microfinance wing will give an opportunity to Unit holders to... 

Islamic Microfinance industry is rapidly progressing due to its superior performance for poverty alleviation (Abu Dhabi)Islamic Microfinance is rapidly gaining acceptance in Muslim and Non- Muslim countries due to its remarkable performance in poverty eradication; because of which, this industry is making quick progress. According to our careful... 

Islamic Microfinance industry is rapidly progressing due to its superior performance for poverty alleviation

(Abu Dhabi)Islamic Microfinance is rapidly gaining acceptance in Muslim and Non- Muslim countries due to its remarkable performance in poverty eradication; because of which, this industry is making quick progress. According to our careful estimate Islamic Microfinance market’s worth has reached $1 billion. These views were expressed by Muhammad Zubair Mughal, the Chief Executive Officer of AlHuda Centre of Islamic Banking and Economics (CIBE) ,while, addressing the International Islamic Finance conference as a Guest of Honor. This conference was organized in Abu Dhabi-the capital of United Arab Emirates, in which the experts and researchers of Islamic Microfinance industry participated from all over the world. The event was organized on 14th- 16th April, 2013 in Park Hyatt Hotel- Abu Dhabi by the international research and publication organization- Emerald in association with Abu Dhabi University.

Muhammad Zubair Mughal said that currently more than 300 Islamic Microfinance institutions are offering their services to 1.6 million clients in almost 32 countries. Due to Islamic microfinance’s significant role in reducing poverty, international donor institutions and multilateral organizations like USAID, IDB, ADB, IFAD, UNDP, World Bank and IFC etc have clearly explained their policies in different countries to further strengthen Islamic microfinance, which will ensure the quick advancement of Islamic microfinance in near future. He added that if we take an overview of last 10 years of Islamic finance industry, it can be observed that with the passage of time Islamic banking, Sukkuk, Takaful and Islamic fund etc have progressed quickly. While, in next 3 years Islamic microfinance will progress more quickly relative to other Islamic financial products.

He informed that to further strengthen Islamic microfinance, AlHuda CIBE has established an international division named “Centre of Excellence in Islamic Microfinance (CEIMF). Its major objective is to provide the Advisory & Consultancy to Microfinance Institutions so that conventional microfinance institutions can be transformed into Islamic microfinance institution and along with this new Islamic Microfinance Institutes can be established. In this regard, Centre of Excellence in Islamic Microfinance is offering its services in Azerbaijan, Yemen, Afghanistan, Pakistan, Mauritius, Indonesia, Kazakhstan and other countries. He stated that there is immense need of research in Islamic microfinance industry so that new Islamic microfinance products can be introduced. As at present, only Murabaha has 80% share of total Islamic microfinance market. He mentioned that the popularity of Islamic microfinance is evident from this point that many international universities have requested AlHuda CEIMF to assist them in incorporating Islamic microfinance as a subject in their business & finance syllabus.

Muhammad Zubair Mughal said that almost half of the world’s poverty is prevalent in Muslim countries. One of the reasons of high poverty rate in Muslim countries is the refusal of Muslims to take interest based loans. Islamic Microfinance is an essential tool to eradicate poverty from Muslim world otherwise the attainment of the United Nation’s Millennium Development Goals is impossible.

By Charles Mwaniki, Business Daily Microfinance institutions that got Central Bank of Kenya’s approval to collect customer deposits have raised nearly Sh7 billion in about two years, the lenders’ financial statements for 2012 show. This has given the deposit-taking microfinance institutions (DTMs) headroom to cut their reliance on expensive... 

By Charles Mwaniki, Business Daily

Microfinance institutions that got Central Bank of Kenya’s approval to collect customer deposits have raised nearly Sh7 billion in about two years, the lenders’ financial statements for 2012 show.

This has given the deposit-taking microfinance institutions (DTMs) headroom to cut their reliance on expensive borrowings as increased customer deposits provide an alternative source of cash.

The 2012 financial results of Faulu Kenya DTM, Rafiki DTM, SMEP DTM and Kenya Women Finance Trust (KWFT) DTM show their collective customer deposits rose by 168 per cent, from Sh2.6 billion in 2011 to Sh6.9 billion in 2012.

Borrowings on the other hand went up by only four per cent in the second year since the DTMs were licensed, while the income from interest on loans went up by Sh1 billion or 23 per cent, reflecting the expanded loan books.

Faulu Kenya for instance saw its loan book rise from Sh3.3 billion in 2011 to Sh5.03 billion last year. Its borrowings went down from Sh2.42 billion to Sh2.16 billion as customer deposits rose by Sh2.35 billion to stand at Sh2.98 billion in 2012.

Rafiki general manager George Mbira said the increased customer deposits had helped them reduce the dependence on borrowed funds.

“We now have close to Sh600 million in deposits, helping us expand our loan book. For us, when we borrow in foreign currency, we can get a good rate of about four per cent, but when you factor in hedging costs the rate rises to around 15 per cent,” said Mr Mbira.

This increase in income helped three of the DTMs record big rise in profitability, with only KWFT recording reduced profits from Sh302.4 million in 2011 to Sh173.8 million in 2012 following an increase of Sh345 million in staff costs.

Faulu Kenya net profits for 2012 went up by 119 per cent from Sh25.6 million in 2011 to Sh58.2 million. SMEP reported a 104 per cent rise in net profit to Sh53 million from Sh25.8 million in 2011.

Rafiki turned around a net loss of Sh15.4 million in 2011 into a Sh5 billion profit in 2012.

Remu, Century and community-based Uwezo DTM are yet to report their full year results, having been set up less than one year ago.

Mr Mbira, however, noted that there were challenges for DTMs seeking to establish their presence in the market given the stringent regulations and problems with capital and technology.

“We are lucky because we have a banking background with our partner bank (Chase Bank). For DTMs, the infrastructure costs to set up banking halls are high, up to Sh70,000 per square foot, and also setting up the technology required. Customers are used to high standards in banks, and you have no choice but to keep up,” said Mr Mbira.

The rules hit harder on microfinance institutions seeking to convert to DTMs than those setting up as DTMs from the onset. SMEP chief executive Phyllis Mbungu said that while mobilising customer deposits is slower than they would like, they expect CBK and Treasury to change rules to allow DTMs attract big depositors.

“At the moment we are not able to offer current accounts or cheque books. We expect the regulatory framework to change to clear these hurdles and enable us attract the big savers,” said Ms Mbungu.

DTMs are also at a disadvantage when it comes to provisions for bad loans as they are supposed to classify a loan that is not serviced for more than three months as a loss, while banks have 12 months.

Ms Mbungu said the outlook remains bright, adding that her institution is eyeing a key role in disbursing the Sh6 billion women and youth fund promised by President Uhuru Kenyatta.

Casablanca, Morocco, 9th April, 2013 - MicroFinance Transparency is organizing a workshop in Casablanca, Morocco to mark the official launch the Transparent Pricing Initiative in Morocco. The Initiative is sponsored by the Netherlands Platform for Microfinance (NPM) and delivered in partnership with Planet Rating and Centre Mohammed VI de Soutien... 

Casablanca, Morocco, 9th April, 2013 - MicroFinance Transparency is organizing a workshop in Casablanca, Morocco to mark the official launch the Transparent Pricing Initiative in Morocco. The Initiative is sponsored by the Netherlands Platform for Microfinance (NPM) and delivered in partnership with Planet Rating and Centre Mohammed VI de Soutien à la Microfinance Solidaire (CMS).

The Transparent Pricing Initiative consists of four main activities; namely, (1) data collection, standardization and dissemination of microfinance product pricing; (2) training for MFIs and financial institutions, networks, donors, investors and other stakeholders; (3) provision of education materials for all microfinance stakeholders; and (4) policy recommendations to regulators on microfinance pricing disclosure.

The workshop, which gathers key institutions and organizations that work in the microfinance sector in Morocco, will share the new industry standards for calculating prices of microcredit products and explain how Moroccan Microfinance Institutions (MFIs) can actively participate in the Initiative. MFTransparency, in partnership with Planet Rating, shall then collect and publish comparable data on the prices charged to microfinance clients in Morocco. As a prerequisite for responsible pricing and a key element of consumer protection, transparent pricing leads to increased competition and better informed decisions by all industry stakeholders. The Initiative will ultimately result in increased knowledge of pricing within Morocco’s microfinance industry.

MFTransparency, the industry leader in transparent pricing, works with MFIs, Central Banks, and funders to bring pricing transparency to the microfinance industry. The Initiative in Morocco will be the first to take place in the Middle East and North Africa (MENA) Region. MFTransparency has previously conducted similar workshops and data collection efforts in more than 30 countries, including; Malawi, Uganda, Tanzania, Zambia, Mozambique, Rwanda, Kenya, Senegal, Burkina Faso, Togo, Benin, India, Bosnia, Peru, Bolivia, Ecuador, Colombia, Argentina, Cambodia, Bangladesh and Azerbaijan. Over 1,300 industry professionals and organizations have committed to transparent pricing by endorsing MFTransparency and the Transparent Pricing Initiative, including Nobel Prize Laureate Professor Mohammed Yunus.

Chuck Waterfield, CEO of MFTransparency commented “We are delighted that Morocco will be the first country in the MENA region to be recognized for its efforts in promoting improved social performance and consumer protection principles through microfinance product pricing transparency. Morocco has been a leader in the microfinance sector in the MENA region and across the world in many ways, and we are pleased to see the sector reaffirming its commitment to responsible microfinance through endorsement of the Transparent Pricing Initiative.”

Emmanuelle Javoy, Managing Director of Planet Rating commented “Transparent pricing data enables us to better understand the competitive environment of the MFIs that we rate. This information is crucial for us to be able to provide a good analysis of their Client Protection practices (Transparency or Responsible Pricing), or on their market positioning. Planet Rating is therefore very happy to work in partnership with MFTransparency to bring the data needed by market actors (MFIs, regulators, and investors) to make the right analysis and decisions”.

Youssef Errami, Executive Director of CMS, noted that “One of the main goals of the Moroccan Microfinance strategy is to serve 3.2 million beneficiaries in the 10 coming years. The industry’s professionalization is undoubtedly one of the fundamental elements of this strategy. The Transparent Pricing Initiative in Morocco is being launched at a time when all the stakeholders are joining efforts to stimulate the industry again, in order to face the social and economic changes in the country. This Initiative is undertaken within the context of a deep professionalization of the industry, but also within the framework of the client protection principles. The interest arising from this Initiative led us to support this momentum and the thoughts resulting from it. That is the reason why we are very pleased to host our partners for a large and fruitful debate.”

About MicroFinance Transparency

MicroFinance Transparency (MFTransparency) is an international non-governmental organization founded in 2008 with the purpose of facilitating transparent markets through pricing disclosure, education and policy advisory. MFTransparency represents an industry movement toward transparent practices and responsible microfinance. Based in the United States, the group has organized transparent pricing efforts in nearly 30 countries on four continents. Grameen Bank’s Dr. Muhammad Yunus and Elizabeth Littlefield, former CEO of CGAP, as well as over 900 industry professionals and organizations have committed to transparent pricing by endorsing MFTransparency and its initiative. For more information on MFTransparency, please visit www.mftransparency.org.

About Planet Rating

Paris-based Planet Rating is a global rating agency specialized in microfinance, focused on providing all microfinance stakeholders with the information they need for sound growth of the sector. Founded in 1999, Planet Rating has provided more than 650 financial and social ratings of MFIs, playing a vital role in professionalizing the sector for over a decade. Planet Rating provides high quality and unbiased rating reports, and offers a global geographic coverage through its six offices located in Paris, Lima, Dakar, Nairobi, Beirut, and Manila. For more information on Planet Rating, please visit www.planetrating.com.

About Centre Mohammed VI de Soutien à la Microfinance Solidaire (CMS)

According to the high Instructions of His Majesty King Mohamed VI, and in consultation with stakeholders in the microfinance industry in Morocco, Mohammed V Foundation for Solidarity established Centre Mohammed VI de Soutien à la Microfinance Solidaire in 2007 as a support center for microfinance. The Centre strives to support the efforts of Microfinance Institutions (MFIs) in Morocco as well as promote their activities through: (1) training of MFIs staff, (2) establishment of a system of information and documentation, and (3) marketing the products of microfinance clients. For more information on CMS, please visit http://www.cm6-microfinance.ma.