By Zacharia Osanga, The Citizen

Dar es Salaam. The Dar es Salaam Community Bank is finalising plans to transform into a commercial bank, the board chairman Paul Rupia said yesterday. DCB, which is listed at the Dar es Salaam Stock market since 2008, started operations in 2002 as a microfinance bank serving the people of the city.

Its main shareholders are Kinondoni, Ilala and Temeke municipalities, the Unit Trust of Tanzania and individual investors. Mr Rupia said the bank wants to become a fully fledged commercial bank in order to implement its growth strategies, which mainly entails expanding the network to other regions.

“DCB’s capital has increased to Sh14.5 billion, which is way beyond the minimum capital for a commercial bank and it therefore qualifies us to become a full fledged bank, a process which will allow them to open branches out of Dar es Salaam,” he said. By becoming a commercial bank, DCB would also be able to offer more banking products to its customers.

The bank has already started reorganisation of its operations by creating more departments including the treasury, import and export, SMEs, and corporate, which would cater for large customers and municipalities.

For his side the bank’s CEO, Mr Edmund Mkwawa, said the bank’s portfolio reached Sh60 billion for the year 2011. The loans were given to about 60,000 individuals, 2,000 groups.
“The bank has also Sh78.8 billion deposits from about 104,415 customers, 78 per cent of whom are women,” Mr Mkwawa said.

By Akinola Ajibade, The Nation

The Central Bank of Nigeria (CBN) has introduced measures to sanitise microfinance banks (MfBs). In this report, AKINOLA AJIBADE examines how effective the measures are.

The microfinance banking sub-sector is plagued by problems such as inadequate capital, bad debt, management ineptitude, weak corporate governance structures, faulty accounting procedures and corruption.

Others are poor skills, inability of the operators to properly understand the concept of microfinance banking, among others. These have eroded confidence in the sub-sector, making it a source of concern to many, especially the Central Bank of Nigeria (CBN). To revive the operations of the 898 microfinance institutions, CBN introduced some far-reaching measures, which are part of its reforms agenda for the banking industry, aimed at putting the banks on the path of profitability.

Like what happened to commercial banks, the reforms in the microfinance banking were introduced, inter alia, to lay to rest the notion that the banks were no longer capable of recording growth.

The reforms

Part of the reforms is the introduction of the electronic format of rendering returns to CBN against the manual method; categorisation of banks into unit, state or national level; the imposition of a new capital regime of N20 million, N100 million, and N2 billion on the banks; and granting the banks a waiver not to participate　 in the microfinance programmes.

Others include examination of the books of the banks, and the directives on a uniform accounting year for them, among others.

Since the reforms were introduced, the banks have been making frantic efforts to improve their operations albeit at a greater cost. While many have adopted cost-cutting measures to stimulate growth, others are fine-tuning plans to get sizeable shares of the market. In all these, stakeholders have described the reforms as the best thing to have happened to the sub-sector. They see a brighter future ahead for the banks.

Uniform accounting year

With the successful implementation of a uniform year-end for the commercial banks, the apex bank saw the need to do the same for microfinance banks.Consequently, it directed the microfinance banks and other companies in the Other Financial Institutions (OFIs) to adopt a common financial year-end with effect from December, 2012. The directive, as contained in a circular issued on Tuesday last week,　wants the companies under the umbrella of the OFIs to pass a resolution to that effect and further inform relevant agencies in line with Section 334 Sub Section 4 of the Companies and Allied Matters Act of 1990.

Speaking on the issue, the Chairman, National Association of Microfinance Banks (NAMBs), Lagos Chapter, Mr Olufemi Babajide, said the decision of commercial banks to implement a common year-end in 2009 sent a signal to other operators in the industry.

Babajide said the operators were not surprised by the directive on common financial year-end, because they have been looking forward to CBN to introduce the policy.

He said: “As a matter of fact, the microfinance banks operators have been using a common year accounting policy before the CBN issued a circular last week. We have started using a common financial year as far back as 2009. I’m talking in relation to the over 200 microfinance banks operating in Lagos. I think the banks in other parts of the country have been doing similar things. Now that the apex bank has compelled all the microfinance operators to adopt a uniform accounting year, the better for the sub-sector.”

He said the development would enable the CBN to do proper ratings of microfinance banks, and ascertain the liquidity positions of the banks.

“For instance, if my bank prepares its financial statement on December 1, and another bank does its own in July, there is no uniformity in that. That would not augur well for the system because the CBN would not be able to access enough information and further rate the banks. Now that the policy on common year-end has been put in place for the microfinance banks, it would be much more easier for CBN to get all the indices necessary for the growth of the banks,” he added.

The Managing Director, Havilla Microfinance Bank Limited,　Mr Rufus Oluyole, toed a similar path. Oluyole said microfinance institutions had since adopted a common year-end to stimulate growth. He said operators had no option than to adopt a common year-end policy, because the commercial banks had complied.

“Since the commercial banks have adopted the uniform financial year, it behoves on the operators of microfinance to adjust their financial statements in line with the policy,” he said.

Cashless banking

Following the implementation of the cashless banking policy in Lagos on January 1, industry observers thought the policy was an all-inclusive one involving stakeholders in the financial industry chain.

But it was not as if the CBN excluded microfinance banks from participating in the cashless banking initiatives. The development was attributed to issues such as illiteracy, lack of exposure and low adoption of electronic banking, among others.

According to Babajide, the exclusion of microfinance banks from cash-less banking implies that customers can now withdraw and deposit above the stipulated limit of N150,000 per individual and N1 million for a corporate entity.　 He said customers of MfBs have not embraced electronic banking such as Automated Teller Machine (ATM) transactions, adding that the development would pose a threat to the implementation of the cashless policy.

He said implementing the policy would not be an easy task in the sub-sector even though the banks have been persuading customers to pay in cheques and do other banking transactions electronically.

“Of course, we are now appealing to customers to pay with cheques and withdraw from ATM points with the aim to operate a cashless banking, but the compliance is not going to be immediate. It will take a gradual process before MfBs can join the initiative,” he said.

On his part, the Managing Director, Support Microfinance Bank, Mr Sunny Ahkamiokhor, said the microfinance market is not yet ripe for cashless operations. He said the banks would not be able to service its customers properly, if CBN insists on its cash limit for individual and corporate entities.

The Managing Director, Owotutu Microfinance Bank Limited, Mr Oladipupo Ajayi, said it would take time for customers to embrace cashless banking initiatives.

“The cash-less banking policy will give room for easy movement of cash, while it will also prohibit fraud, theft and armed robberies. In spite of these, the microfinance market is not ready for this policy. Microfinance banks are educating the masses on cash-less banking model, but it will take time because people don’t like change. My bank is sensitising the customers to key into this policy and we hope that the market will soon be ready for it,” he said.

New capital regime

Prior to the introduction of new capital requirements for the microfinance banks in June last year, the banks were under-funded. Most of them were operating partially, while others have closed shops. This made CBN to conduct a special examination of the banks in 2010. In the process, 224 microfinance banks were axed for poor performance.　 Subsequently, the apex bank imposed a new capital regime on the banks to strengthen their operations.

Industry observers said the imposition of a new capital base, was one of the major steps taken to re-invigorate the sub-sector.　 According to the Managing Director, Gold Microfinance Bank Limited, Mr Lanre Abiola, the development would improve the fortunes of the banks.　Abiola said the operational capital of the banks were not only small, but incapable of sustaining them.

He said many of the banks were struggling to survive last year, because they were not unable to advance credits to their customers. He added that the banks were finding it difficult attract more deposits, due to loss of confidence then.

“If you look the performance of some of the banks two years ago, it is nothing to write home about.　 The banks were grappling with challenges such as poor risk management framework, capital, skills and energy. Also, many operators were coming from the commercial backgrounds to manage microfinance banks.

“They have forgotten that the two are not same. So, there was a misplaced priority. At the end, many banks fizzled out within a short time. But that era has gone as banks are recapitalsing their operations in line with the regulatory policy,” he said.

Abiola said once the banks are fully recapitalised, they would be able to record better growth.

“I think the reforms have helped in returning confidence into the sub-sector. As time goes on, the banks would effectively serve those in the low-income bracket of the economy. That has been the expectations of the operators since the reforms started two years ago,” he added.

Online rendition ofreturns

Stakeholders have hailed the decision of CBN to introduce online rendition of returns for microfinance banks, describing it as a welcome development. They said electronic rendition of returns, was part of the efforts to make microfinance activities more attractive.

The Managing Director, MainStreet Microfinance Bank Limited, Mr Kashim Olanrewaju, said: “We have been rendering our returns both electronically and through hard copy. I think we have a system that is compliant. It is a very innovative measure that is capable of raising the standards of the banks. This is part of the reforms measures introduced to buoy activities in the sub-sector,” he said.

Responding to the development, the Managing Director, Accion Microfinance Bank Limited, Bunmi Lawson, said her bank has been rendering monthly returns in both hard copies and e-mails as the CBN required.

“You know that Accion is very keen on technology and, in fact, we use D 24, which is one of the most robust core banking platforms. We have been rendering our returns both in hard copies and e-mails,” she said.

By Biswarup Gooptu, The Economic Times

BANGALORE: Ujjivan Financial Services raised Rs 127.9 crore ($25 million) in its fifth round of equity financing, the Bangalore-based microfinance company announced on Wednesday.

The latest round of capital infusion came largely from two new foreign institutional investors, FMO (Netherlands Development Finance Company) and WCP Mauritius Holdings III (Wolfensohn Capital Partners), according to a press statement released by the company.

Existing investors, including Lok Capital, India Financial Inclusion Fund (Caspian Advisors), Sequoia Capital, Mauritius Unitus Corporation and Elevar Equity, also participated in the equity fund raising.

“We thank our existing investors who continue to reiterate their commitment to us and welcome our two new investors. This round of equity funding will make Ujjivan one of the best capitalised MFIs in the country,” Samit Ghosh, founder and managing director, Ujjivan, said.

The latest round of capital infusion, Ujjivan’s first since 2009, is expected to double it’s capitalisation to Rs 230 crore, and had Kotak Investment Bank advising on the deal.

“This is the first investment for Wolfensohn in the Indian microfinance sector, endorsing our faith in the sector and in Ujjivan’s financial inclusion model,” Sanjiv Kapur, managing director, Wolfensohn India Advisors Pvt. Ltd. Said.

Led by former sworld Bank President, James D. Wolfensohn, WCP focuses on growth-stage investments – especially in the financial services sector – in emerging markets. Dutch development bank FMO focuses on agri-business, energy and housing amongst others.

The additional capital will help increase the microfinance company’s loan book from its current Rs.600 crore to around Rs.1,600 crore, given the Reserve Bank of India’s 15% capital adequacy requirement for NBFC-MFIs, according to the press release.

“India continues to be a preferred investment destination for FIIs and it is heartening to see that fundamentally strong organisations in the microfinance sector are a key focus,” Mohit Bhatnagar, managing director, Sequoia Capital – the largest stakeholder in Ujjivan – said.

Earlier in the month, the microfinance company had raised Rs 29 crore through a private placement of non-convertible debentures, which were subscribed by Developing World Markets.

The Indian microfinance sector has been under severe stress since late-2010, following allegations of charging usurious interest rates and enforcing coercive recovery methods. Microfinance companies have been beset by bad loans leading to huge write-offs, a situation that has seen investors and banks shy away from investing in the sector.

By Rebecca Ng, insurancenewsnet.com

China Pacific Life Insurance Co., the fourth-largest life insurer in the country, has been approved to expand its rural individual life microinsurance pilot program to seven Chinese provinces, according to the China Insurance Regulatory Commission.

The Shanghai-based insurer will be allowed to operate rural individual life microinsurance in the provinces of Inner Mongolia, Jiangsu, Zhejiang, Hunan, Qinghai, Ningxia and Xinjiang. The company can also develop its own business model in various districts according to their domestic lower-income conditions, and is required to report to the CIRC in a timely manner, said the regulator.

The CIRC intends to further develop the domestic rural insurance and catastrophe insurance markets in 2012, said Junbo Xiang, chairman of the CIRC, in a conference in Beijing (Best’s News Service, Jan. 31, 2012).

China Pacific Life reported total cumulative premium income of 87.86 billion yuan (US$13.94 billion) in November 2011, up 7.8% from 81.52 billion yuan in October, noted the regulator.

Last October, the insurer’s nonlife affiliate China Pacific Property Insurance received the regulator’s permission to participate in the trial program for rural individual life microinsurance.

China introduced rural individual life microinsurance in August 2008. China Life Insurance Co., the largest Chinese nonlife insurer, was the first to participate in the trial program by providing coverage in nine provinces. while China Pacific Life was originally cleared to provide rural individual life microinsurance, including accident injury insurance and group fixed-term life insurance, in counties and administrative villages in the provinces of Hunan, Hubei, Guangxi and Sichuan.

At the end of the first half of 2009, the trial program generated premiums from rural individual life microinsurance of more than 140 million yuan and underwrote more than 81 billion yuan in risks, according to the CIRC (Best’s News Service, Oct. 19, 2011).

AlHuda Centre of Islamic Banking and Economics Press Release

UN-Millennium Development Goal (MDGs) can be achieved by eliminating Poverty through Islamic Microfinance:

(Istanbul) Two days International summit on Islamic Microfinance is started in Istanbul. The basic purpose behind this summit is to promote Islamic Microfinance and to elucidate the strategy to remove obstacles from its way to progress. Microfinance experts from different continents like Africa, Asia, Europe and America etc. are participating in this Int’l summit. While speaking to the opening session of the Summit, Muhammad Zubair Mughal, Chief Executive Officer, AlHuda Centre of Islamic Banking and Economics said that Pakistan has been acknowledged as a leader of Islamic Microfinance Industry and right now in Pakistan; more than 20 institutions are providing microfinance services. While highlighting the importance of Islamic microfinance, he said that around the world, conventional Microfinance has badly failed and its examples can be clearly seen in India and Latin America. He further added that due to the failure of conventional financial system, many countries in the world are adapting Islamic microfinance system for poverty alleviation through which not only poverty will be eradicated but also a sustained economy shall come into being in these countries.

While addressing to the International Summit, he further added that one reason behind expansion of Poverty is interest base mechanism in Muslim countries, People do not use Financial and Banking system due to interest as it is  strictly prohibited in Islam hence forced to live in poverty whereas through Islamic Microfinance by using the financial products based on Shari’ah principles, we can get the people out from poverty. He further highlighted the need assessment of Islamic microfinance in Muslim Countries by saying that 44% of conventional Microfinance clients live in Muslim Countries and United Nations has added half of the countries of Islamic Development Bank in the list of least developed countries which shows that Islamic Microfinance can be used to eradicate poverty from Muslim-Majority Counties. While identifying the Muslim population and poverty in different regions of the world, he said that 85.5% in East Asia, 34% in South Asia, 58% in West Africa, 58% in Caucasus and 97.3% in MENA are Muslims and collectively, in 2.4 Billion population of these regions, Muslims are of 48.3% which clearly shows the need of Islamic Microfinance for poverty alleviation in these countries. He further added that not only Muslims but Non-Muslims can also get benefits from Islamic Microfinance because Islamic Microfinance is not a religion but a system which is equally useful for Muslims and Non Muslims as well and the clear example of this fact is that Non-Muslims consider it very attractive.

He said that Islamic Microfinance is essential to achieve Millennium Development Goals( MDGs), proposed by United Nations for alleviating poverty and social uplifting. He further added that if development of Islamic Microfinance starts right from today, these goals can easily be achieved till 2015. He said that Islamic Microfinance sector is facing difficulties due to apathy of Donors and to fulfill this deficiency, Sukuk (Islamic Bonds) can be issued. He further said that more financial products can be introduced by enhancing research in the field of Islamic microfinance and there are many opportunities for development in this field. AlHuda Centre of Islamic Banking and Economics has established a specific Microfinance help desk so that trainings, research and technical consultation could be provided to Microfinance Institutions worldwide.

In this Summit, the role of Pakistan in the development of Islamic Microfinance has very much appreciated and Pakistan is considered to be as global leader of Islamic Microfinance Industry. This conference will continue for 2 days in Istanbul.

From Africa News

The Ghana Association of Microfinance Companies (GAMC) is bracing up to protect the industry and help safeguard funds of depositors.

The business group is to operate under the second tier of the regulated microfinance institutions, which includes susu companies taking deposits and making profits.

Under the new Bank of Ghana operating rules and guidelines, firms under this category shall hold an initial minimum paid-up capital of not less than Gh¢100,000.00 for one unit office.

According to Collins Amponsah-Mensah, the National Board Chairman of the GAMC, over 350 companies have so far been registered with the association and ready for regulation.

He expects 700 more to be registered by end of year to be licensed to operate as microfinance companies.

The new licensing requirements were expected to take effect within from January 2012.

“The deadline has ended”, Mr. Amponsah-Mensah told Luv Biz Report. “We’ve not officially been informed of any extension. We are just encouraging our members to take advantage of the seemingly relaxed posture of the regulator to file for licensing”, he added.

Mr. Amponsah-Mensah said the Association will be seeking public cooperation to flush out unscrupulous microfinance operators in the system.

He has also cautioned the public against giving money out without cross-checking the background of the receiving company.

Meanwhile, the Ministry of Finance and Economic Planning is building the capacity of the microfinance institutions to offer qualitative micro credit to rural farmers and other businesses.

This is part of the Ministry’s Rural and Agriculture Finance Programme (RAFiP), which supports improved agriculture and sustainable livelihood of the rural poor.

Microfinance companies from the northern sector of the country participated in one of such capacity building programmes in Kumasi.

Mr. Amponsah-Mensah has lauded the Ministry for providing a 60 percent subsidy for the cost of training members.

He noted that capacity building is critical for microfinance firms to better manage on-lending funds to boost agriculture financing.

Story by Kofi Adu Domfeh

By Hope Moses-Ashike, Business Day Online

As microfinance banks in the country adopt a uniform financial year-end, following a directive from the Central Bank of Nigeria (CBN), there is now more than ever – an oversight regulation on the part of the authorities.
The directive, which came last week, according to the apex bank, is targeted at ensuring that microfinance banks alongside other financial institutions align with standards already set for the deposit money banks.

In the circular, the CBN said all financial institutions should have a uniform financial year-end, and the microfinance banks have complied.

Reacting to the development, Olufemi Babajide, chairman, National Association of Microfinance Banks (NAMB), Lagos chapter, said microfinance banks, particularly those in Lagos, have already adopted the uniform financial year-end.
He said they adopted this in 2009, when the CBN first directed deposit money banks to adopt a uniform financial year-end.

According to him, adopting a uniform financial year-end will allow for proper evaluation of microfinance banks, as “we are already complying.”
To Godwin Ehigiamusoe, managing director, Lift Above Poverty Organisation (LAPO) Microfinance Bank Limited, we’re actually expecting the directive since it had earlier been decreed for commercial banks. “I do not think it is unusual,” he said.
The directive through a circular to Other Financial Institutions (Primary Mortgage Institutions, Microfinance Banks and Finance Companies) released last week by the CBN, states that compliance is effective December 31, 2012.

The circular states further that during this transformation, a maximum accounting period of 18 months and a minimum of six months are allowable, as other financial institutions whose accounting year ends on December 31 are expected to forward their full year’s accounts to the CBN for approval not later than four months after the year-end.

The implication, according to analysts, is that temporal access to funds for other financial institutions to cover some shortfalls in their balance sheets or to meet some regulatory requirements will no longer be possible, since all the banks will be expected to hold their annual general meetings at the end of every year.

Besides, this will give opportunity to the investing public and shareholders to access the performance of their institutions, since this will usher in an era of competition.
Part of the circular signed by Chris Chukwu, director, financial policy and regulatory department, reads: “To avoid regulatory arbitrage, and provide a level playing field for all operators, it has become necessary to adopt a uniform accounting year-end in the Other Financial Institutions (OFIS) sub-sector.

“In this regard, the CBN circular number BSD/DIR/GEN/CIR/VOL.2/004 of June 18, 2009, requiring all banks and discount houses in Nigeria to adopt December 31, as a uniform accounting year-end from 2009 shall henceforth be applied to OFIs.
“During the period of transition, a maximum accounting period of 18 months and a minimum of six months are allowable, in line with accepted accounting practice.

In the circumstance, OFIs whose accounting year end on December 31, should as usual, forward their full year’s accounts for the CBN’s approval not later than four months after the year-end.
“Those with year-ends between January and May 2012, should submit the normal audited accounts 12 month for the CBN approval and thereafter, submit their audited accounts for the pro-rated period December 31, 21012.”

From Kong Kong’s Information Services Department

Financial Secretary John Tsang will commission the Mortgage Corporation to introduce a three-year pilot microfinance scheme, offering a maximum loan tentatively capped at $100 million.

In his 2012-13 Budget speech today, Mr Tsang said the scheme will be operated on a self-financing basis with supporting services provided to make microfinance more viable, to help people wanting to start their own businesses or take self-enhancement training.

Target borrowers are business starters, self-employed people and those who wish to receive training, enhance their skills or obtain professional qualifications for self-improvement.

The repayment period will be as long as five years and the interest rate will be set with reference to that of the personal loans charged by banks in general.

The corporation will announce details on the scheme soon.

Mr Tsang also proposed injecting an additional $200 million into the Community Investment & Inclusion Fund, and make corresponding financial arrangements to incorporate the appropriate individual programmes of the Community Care Fund into the Government’s regular assistance programmes, subject to the views of the Steering Committee on the Fund.

From The Economic Times

KOLKATA: State-run Small Industries Development Bank of India, or Sidbi, is contemplating equity investment in microfinance companies after a year long hiatus. Sidbi will use a 100-crore dedicated fund, created by the government, for investing in smaller MFIs to help them grow in a regulated environment, an official said. “We are looking at a few proposals and may finalise some of them by March,” S Muhnot, managing director, told ET.

The bank is also open to the idea of investing in bigger firms using its own resources. It has sought the RBI’s permission to do so.

Last year, Sidbi froze equity investment in MFIs on the RBI’s insistence after the sector saw an unprecedented liquidity crisis. It forced many bigger micro-lending firms to scale down business and restructure their bank loans. The government and RBI had to step in to protect the sector from virtual collapse. The RBI then framed regulations for MFIs for the first time.

From Options Senegal

The Senegalese microfinance institution, Union des Institutions Mutualistes Communautaires d’Epargne et de Crédit (U-IMCEC) signed a memorandum of understanding today to provide access to financing and set up savings accounts for GIEs and GIE members in the Options Senegal Ecolign Entrepreneurial Program.

U-IMCEC was formed in 1997 by ChildFund Senegal with the goal of increasing children’s well-being through increased family income. Today U-IMCEC is an independent financial institution with over 50,000 members served by more than 40 branches in urban, suburban, and rural communities throughout Senegal. 56.75% of loans made by U-IMCEC are to women entrepreneurs.

U-IMCEC continues to work closely with ChildFund Senegal to promote its goals of entrepreneurial development, capacity building, the creation of jobs in rural communities, and working towards an economy that is not dependent on foreign aid.

In addition to providing start-up loans to GIE members involved in the Options Senegal Ecolign Entrepreneurial Program, U-IMCEC participates in Options Senegal training sessions to teach participants how banks operate and how different banking products can assist them as they launch their businesses and manage their personal finances.