By Collins Nweze, The Nation –

In the coming months, the over 800 microfinance banks operating in the country may have been drastically pruned down – not through liquidation, but as a result of mergers and acquisitions. The crisis of confidence and poor liquidity standings among the operators in the industry has led many into considering mergers and acquisition options.

The Chairman of Lagos State chapter of National Association of Microfinance Banks, Mr. David Adenekan, confirmed that strategic consultations among key operators in the microfinance industry are going on. “I can confirm to you that there are plans for mergers and acquisitions among microfinance bank operators in the country. But so far, the discussions are voluntary, we are not compelled by any authority to do so yet,” he told The Nation in a telephone interview on Monday. Also, a management officials of Seed Microfinance Bank, who prefers anonymity, confirmed the new moves by operators to consummate mergers and acquisitions plans. “We are working on this plan to enable us play bigger in the market,” he said.

Adenekan explained that with N20 million minimum capital, many of the banks are finding it difficult to meet their financial obligations to customers. He said a merger of three or four banks in this category will speed up the banks’operational and liquidity positions for greater efficiency.

The liquidity problems in the industry, which has resulted to the inability of the banks to pay customers was also worsened by rising loan default.

Aside insider loan abuse, managers of microfinance banks have also been accused by the Central Bank of Nigeria (CBN) of perpetrating false statements used by customers for travel visa to foreign countries. There were also accusations of cheque diversion leveled against these managers.

Director of Other Financial Institutions Supervision Department (OFISD) at the CBN, O.A. Fabanwo, said: “We have seen cases where banks give forged statement of accounts to their customers and other visa seeking persons. We will henceforth sack any CEO or staff found to be involved in this fraudulent practice,” he said.

He said managers and staff of microfinance banks who specilise on such acts will henceforth lose their jobs. The practice which has reached a crisis point was drawn to the attention of the apex bank especially, by the British High Commission.

Fabanwo said the apex bank had investigated many cases brought before it especially from the British High Commission and that henceforth, where such cases are established, the chief executive officer of the bank and the staff involved will be sanctioned. “We will begin to sanction MDs on this especially if they fail to take necessary measures needed to safeguard the integrity of the industy,” he said.

He noted that series of complaints have equally been lodged concerning using the MFBs as clearing house for fraudulent cheques emanating from parastatals, companies and agencies. He advised the banks to be cautious in handling third-party cheques as to ensure that credits are given to the right beneficiaries.

He advised management of the banks to ensure that all official documents are retrieved from all staff leaving the company and that henceforth, all correspondence to the embassies be countersigned by the MD. He said the same measure applies to Primary Mortgage Institutions (PMIs). Already, as part of security building process, the CBN has requested and obtained the specimen signatures of all authorised signatories in both MFBs and PMIs. Another issue that has been brought to the attention of OFISD is the increasing number of fraudulent third party cheques being cleared in MFBs.

In recent times, MFBs have been riddled with problems ranging from insider abuse, embezzlement and other fraudulent transactions that affected public confidence in their operations. Following series of reforms by the CBN aimed at strengthening the operations of the banks, some ray of hope have returned. MFBs recently received a boost after a N60 billion secured funds were released to the industry. The funds secured by Africa Capital and Business Support Limited, (ACBS) in partnership with Suisse Bank of London will allow MFBs in the country to access long term debt funds of up to 10 years.