Nigeria: Recapitalisation – 15 microfinance banks may merge

Fifteen out of the 450 microfinance banks in the South-west have indicated their interest to merge with the stronger ones, an official of the banks’ association said.

The South-west Zonal Chairman, National Association of Microfinance Banks (NAMBs), Mr Olufemi Babajide, said that the merger was to beat the CBN’s directive that the banks should recapitalise by December.

Babjide said in Lagos yesterday that more of the banks were likely to merge before December.

“Fifteen banks are undergoing the process of merging at the association level. I believe other microfinance banks are also arranging for merger outside the association, but I do not have the figure. In April, it was 13 of the banks that opted to merge and now they have increased to 15 banks,” he said.

Babajide said that the parties involved had exhibited high sense of maturity because the association wanted to ensure that none of its members went under.

The CBN had in 2011, directed the operators to raise their capital base or go under.

According to the recapitalisation framework, operator of unit, state or national microfinance bank must have a minimum capital of N20 million, N100 million and N2 billion, respectively. NAN

SOURCE: Daily Trust

Nigeria: NAMB chief urges CBN to build capacity of micro finance operators

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 had improved in recent times because of the training which the operators had received.

Oyekanmi, also the Managing Director of Moneywise Microfinance Bank, said that hitherto many operators were not knowledgeable about operations of the sub-sector.

According to him, most of the operators are from commercial banking sector and there is a wide gap between microfinance banking and conventional banking.

“There is a need for the apex bank to continue the capacity building process in the micro finance sub-sector to enhance efficiency in the system.

“A lot of the operators are from the conventional banking background, they need thorough training to enable them manage their businesses effectively and in accordance with the guiding rules.

`For instance, my managerial skill has improved than when I started operating micro finance business because of the various training programmes I have attended,” he said.

Oyekanmi commended the CBN and the Chartered Institute of Bankers of Nigeria for the Mandatory Certification Programme for all microfinance bank operators.

He urged micro finance operators to embrace the MCP in the interest of the growth of the sub-sector.

SOURCE: Daily Times Nigeria

Nigeria: Operator proffers solution for growth of microfinance banks in rural areas

Chairman, Ikeja Branch of National Association of Microfinance Banks, (NAMB), Mr Dele Oyekanmi, has advised rural dwellers to form cooperatives to establish microfinance banks. Oyekanmi said in Lagos that such initiative would help to address the shortage of microfinance banks in the country.

“The best way to have microfinance banks in the rural areas is for community dwellers to pool resources together and apply for a licence to open a bank. Such move will bring development to our rural communities. It will benefit traders, farmers and even the youths in such communities by way of employment,” he said.

Oyekanmi said that microfinance banks in rural areas had more potential to be profitable as a large percentage of the target customers lived in these communities. The NAMB official, however, said that the poor state of public infrastructure was affecting the development of microfinance banks in the rural areas. “The roads are bad; poor electricity supply and many more infrastructure lags constitute major challenges to the growth of this sub-sector,” he said.

SOURCE: Vanguard

Nigeria: Microfinance banks urge CBN to review directive on unit operators

The Ikeja branch of National Association of Microfinance Banks (NAMBs) has appealed to the Central Bank of Nigeria (CBN) to review its directive that unit microfinance banks should not operate cash outlets outside the bank.

Mr Dele Oyekanmi, chairman of the branch, said yesterday in Lagos that the directive had affected the sub-sector.

Oyekanmi said the outlets were the solid rock on which the unit operator thrived.

A unit operator is that who operates from one office, while the outlet is a meeting point between the unit operator and his customers. Oyekanmi said, adding that the directive that all transactions must hold at the head office had discouraged customers from transacting business with the unit operators.
“The situation is forcing customers to have divergent opinions on the viability of microfinance banks.
“Some customers are threatening to close their accounts for the fear of losing their money should the bank go under,” he said.

Oyekanmi said that the situation did not augur well for the operation of microfinance banks because an economy is built from the base to the peak, adding that those who make up the base are those in the grassroots.

“Microfinance operators take banking services to the people at market places because the traders do not have the luxury of time to go to the head office to withdraw or deposit money.
“Instead they do the transaction with us right in the cash outlets located in the market places,” he said. (NAN)

Nigeria: NAMB Wants More Microfinance Banks

The National Association of Micro-Finance Banks (NAMB) has called on state governments to establish more Micro-Finance Banks (MFBs) to provide employment opportunities at the grassroots.

The national president of the association, Mr Jethro Akun, made the call in an interview with newsmen in Abuja. Akun said the MFBs would serve as a veritable means of channelling micro credit facilities to low income earners and the poor at the grassroots.

He also urged states to consider the importance of financial inclusion to help people with limited or no access to formal banking services.

According to him, it is a legal requirement for states and local governments to set aside one per cent of their annual budget for micro-credit scheme. He said that the association would encourage the states to use their one per cent for the establishment of MFBs to encourage financial inclusion.

Akun commended the Kano State Government for taking the lead in establishing MFBs at the grassroots and urged other states to emulate the Kano model.

He also commended the Central Bank of Nigeria for granting licences to 37 MFBs at a stretch in Kano State.

“To us as NAMB, it is a good development. Looking at it from the surface, it will look as if government is now coming in to run MFBs. But what government is doing is driving development in the sub-sector because of the passion government has to reduce unemployment, poverty at the grassroots level.’’

The NAMB national president said it was instructive that Kano State Government planned to subsequently divest from the banks and allow the communities or citizens within that local government area to run the establishment. He expressed the hope that the establishment of more MFBs at the grassroots would bring down the interest rate. According to statistics from the CBN, about 56.3 million or 64.1 per cent of Nigerians had no access to formal banking services.The apex bank, which recently issued a new set of guidelines for the MFBs in the country, believes the sub-sector has the potential to contribute to poverty reduction, economic growth and development.

SOURCE: The Tide News Online

Nigeria: Nigeria microfinance banks want more branches in states

Nigeria’s Central Bank recently issued new guidelines for microfinance banks.

The National Association of Microfinance Banks, NAMB, has said that if branches are established in states, more job opportunities will be created at the grassroots.

The National President of the Association, Jethro Akun, said on Tuesday in Abuja that its members expect the various state governments to take up the challenge and establish more of these banks in their domains as a veritable means of channeling micro-credit facilities to low income earners and the poor at the grassroots.

According to Mr. Akun, states must consider the importance of financial inclusion to help people with limited or no access to formal banking services find support to grow their businesses.

He said it is a legal requirement for states and local governments to set aside one percent of their annual budget for micro-credit schemes, adding that the association would encourage the states to use their provision for the establishment of MFBs to encourage financial inclusion.

Mr. Akun commended the Kano State Government for taking the lead in establishing microfinance banks at the grassroots and urged other states to emulate the Kano model, while thanking the Central Bank of Nigeria, CBN, for recently granting operational licenses to 37 microfinance banks in the State.

“To us at NAMB, it is a good development. Looking at it from the surface, it will look as if government is now coming in to run MFBs. But what government is doing is driving development in the sub-sector, because of the passion by government to reduce unemployment, poverty at the grassroots level,’’ he said

The association president said Kano State planned to subsequently divest from the banks and allow the communities or citizens within that local government area to run the establishment.

He expressed the hope that the establishment of more microfinance banks at the grassroots would bring down the interest rate, adding that available statistics from the CBN show that about 56.3 million or 64.1 per cent of Nigerians have no access to formal banking services.

The apex bank, which recently issued a new set of guidelines for microfinance banks in Nigeria, said the sub-sector has the potential to contribute to poverty reduction, economic growth and development.

(NAN)

Nigeria: CBN, NAMB agree on review of micro finance banks’ recapitalisation

Abuja – The Central Bank of Nigeria (CBN) and National Association of Micro Finance Banks (NAMB) have agreed to set up a technical committee to resolve “grey areas’’ in the recapitalisation of micro finance banks.

Mr Jethro Akun, the National President of NAMB in Abuja on Thursday said that the two reached the agreement in a meeting, chaired by CBN Governor, Malam Sanusi Lamido Sanusi, on Tuesday.

Akun said that the meeting discussed challenges facing operators of Micro Finance Banks (MFBs) in complying with the Revised Microfinance Policy Framework (RMPF).

He said that the meeting also discussed extensively issues on the capital requirements for each category of MFBs and existing branches as well as cash centres.

“We discussed and we finally agreed that as partners who are working toward financial inclusion, providing access to finance for development and employment for many unemployed people, there is need for us to set-up a technical committee.

“`The committee is made up of CBN and NAMB to look at grey areas of policy for the smooth operation of the micro finance sub-sector and the benefit of the entire society.

“We all acknowledged the contribution of micro finance banks to the economy and we are all happy that the CBN governor is passionate about the development of the sub-sector,’’ he said.

Akun said that the meeting also agreed to look at “any other thing seen as an impediment’’ to the smooth growth and expansion of the microfinance sub-sector.

The CBN had given MFBs up till Dec. 31, 2012 to comply with its new stipulated minimum capital requirements.

The policy provides for three categories of MFBs, namely unit, state and national.

According to the CBN, a unit MFB licence is authorised to operate in one location and shall be required to have a minimum paid up capital of N20 million.
The unit MFB is also prohibited from having branches or cash centres.

In the second category, state MFB is authorised to operate in one state or the Federal Capital Territory (FCT) with a minimum paid up capital of 100 million.
The state MFB is allowed to open branches within the state or the FCT, subject to prior written approval for each new branch or cash centre.

In the third category, national MFBs are expected to have N2 billion and are allowed to open branches in all states of the federation and the FCT, subject to prior written approval for each new branch or cash centre.

NAN also recalls that the CBN had previously issued circulars threatening to revoke licences of MFBs operating unapproved branches and cash centres after the expiration of the Dec. 31, 2012 deadline.

However, till date, the apex bank has yet to sanction any defaulting bank. (NAN)

Nigeria: NAMB cautions CBN on recapitalisation of MFBs

By Providence Obuh, Vanguard

National Association of Microfinance Banks, NAMB South West Zone has warned the Central Bank of Nigeria, CBN on the imminent danger of the revised microfinance policy framework.

Chairman of the Zone, Mr. Olufemi Babajide raised the alarm in a statement entitled dialogue on capitalisation and categorisation of MFBs in Lagos.

Babajide said, “The deadline of December 31st, 2012 is not feasible. We want the deadline to be extended till December 31st, 2014. If implemented, it will erode the gains we are already recording in the sub-sector, especially the stability we are experiencing.

“MFBs are apprehensive because of the pronouncement of the Other Financial Supervision Institution Department (OFSID) . They are not sending their staff for the Certification programme which the CBN is spending money on. They are not paying their annual dues, staff members are afraid of Job loss. State Governments are beginning to withdraw their patronage of MFBs. Depositors are afraid.

“Our regular capacity building cannot be organized because of the fear of another Tsunami that may hit the subsector. Under the Nigeria Incentive- Based Risk Sharing-System for Agricultural Lending (NIRSAL) programme, which is an initiative of the CBN, farmers have already been paired with the branches of MFBs. If such branches are closed, it will be a setback for the programme.

“This will compound the low productivity in the Agricultural Sector. Nigerians will surely go hungry. The Rural Agricultural Programme has already started with the branches of MFBs. If they are closed down, colossal losses will be recorded by Rural Farmers Finance Institution of Nigeria (RUFFIN), Farmers, Cooperative societies, the host communities and MFBs. Other initiatives such as: The United Nation Development Programme (UNDP) Solar power, Oando Gas that the branches of MFBs have signed on will automatically collapse.”

Meanwhile, the Revised Microfinance Policy Regulatory and Supervisory Framework states that “all MFBs that have elected to remain Unit MFBs, as indicated in the compliance plans earlier submitted to the CBN are required to close any existing branches/cash centres.

“All customer interaction centres’, ‘meeting points’ and customer service centres or similar outlets, once located outside the registered business premises of a Unit MFB shall be regarded as unauthorized/unapproved branches/cash centres. All previous approvals for such outlets for Unit MFBS have become null and void from the date of approval of the Revised Policy Framework by the Board of Directors of the CBN.”

The CNB also stipulates that penalty for operating a branch/cash centre without prior approval of the CBN as stipulated In Section 13.1(b) of the Revised Guidelines for MFBS shall attract a fine of N250,000 per branch for a Unit MFB, N500,000 per

Branch for a State MFB and N1, 000,000 per branch for a National MFB and such unapproved branched/cash centres closed within 30 days.

“Failure to close an unapproved branch or cash centre shall attract a fine of N5, 000 for each day of default, irrespective of the category of MFB. Moreover, failure to comply with any directive issued by the CBN, as stipulated in Section 19(i) of the Revised Guidelines for MFBS, Is a ground for revocation of licence.”

It would be recalled that the crisis that rocked the subsector in 2008 led to the revocation of operating licences of about 224 MFBs in the country.

Nigeria: Operators Falter over MFB Guidelines

The deadline for the implementation of the revised microfinance policy framework expired at the end of last month, with a lot of operators yet to comply. Obinna Chima examines the issues surrounding non-compliance with the guidelines.

Globally, microfinance banking is used to provide financial services to micro-entrepreneurs and small businesses with the primary aim of poverty alleviation and financial inclusion.

Microfinance banks (MFBs) were established to fill the gap created by the commercial banking sub-sector by improving the socio-economic condition of the poor income generation.

As a result of the essential role small and medium scale enterprises (SMEs), which are mostly described as the fulcrum for economic growth, play in any economy, a vibrant microfinance banking system is always the target of policy makers.

Unfortunately, the MFB sub-sector in Nigeria has not been able to meet its objectives. In fact, as a result of failure of the sub-sector, the Central Bank of Nigeria (CBN) had in 2010, revoked the operating licenses of 224 MFBs . The apex bank had attributed its action to the high level of non-performing loans, which resulted to high portfolio at risk (PAR) that had impaired their capital, as well as gross undercapitalisation in those affected. A lot of them had also adopted faulty business strategy.

Thus, in order to revamp the sub-sector, the CBN had in August 2011, unveiled the Revised Microfinance Policy Framework last year, with a deadline of December 31, 2012.

But THISDAY findings showed that most MFBs in the country were yet to comply with the new guidelines, even as some of them urged the regulator to extend the deadline.

Revised Policy Framework

Part of the revised guidelines stipulates that all MFBs that have elected to remain as Unit MFBs, as indicated in the compliance plans, are required to close any existing branches/cash centers, etc., subject to prior approval of the CBN in writing and adequate notification to existing customers, who should be advised to migrate their accounts to the MFB’s head office, while dissenting customers should be settled.

A Unit MFB is authorised to operate in one location. It shall be required to have a minimum paid-up capital of N20 million and is prohibited from having branches and/or cash centers.

Also, a State MFB is authorised to operate in one state or the Federal Capital Territory (FCT). It shall be required to have a minimum paid-up capital of N100 million and is allowed to open branches within the same State or the Federal Capital Territory (FCT), subject to prior written approval of the CBN for each new branch or cash centre.

In the same vein, a National MFB is authorised to operate in more than one state including the FCT. It shall be required to have a minimum paid-up capital of N2 billion, and is allowed to open branches in all States of the federation and the FCT, subject to prior written approval of the CBN for each new branch or cash centre.

The CBN added: “For the avoidance of doubt, all customer interaction centers, meeting points and customer service centers, or similar outlets, once located outside the registered business premises of a Unit MFB shall be regarded as unauthorised/unapproved branches/cash centers.

“All previous approvals for such outlets for Unit MFBs have become null and void from the date of approval of the Revised Policy Framework by the Board of Directors of the CBN.”

According to the CBN, the penalty for operating a branch/cash centre without its prior approval as stipulated in Section 13.1(b) of the revised guidelines attracts a fine of N250,000 per branch for a Unit MFB, N500,000 per branch for a State MFB and N1,000,000 per branch for a National MFB.

“In addition, such unapproved branched/cash centers shall be closed within thirty (30) days. Failure to close an unapproved branch or cash centre shall attract a fine of N5, 000 for each day of default, irrespective of the category of MFB. Moreover, failure to comply with any directive issued by the CBN, as stipulated in Section 19(i) of the revised guidelines, is a ground for revocation of licences.

Pushing for Extension

But despite the expiration of the deadline, operators of MFBs in the country said they are still negotiating with the CBN for an extension of the deadline on the implementation of the revised guideline.

National President, National Association of Microfinance Bank (NAMB), Mr. Jethro Akun, who spoke with THISDAY, said: “We are still negotiating with the CBN. What is important in this type of situation is dialogue. We are working with our people to make sure we comply. We are also listening, not just to the operators, but also to the investors.”

On his part, the Chairman, NAMB, South-west Chapter, Mr. Olufemi Babajide, pointed out that MFB operators did not have problem with the new capital requirement, which categorises microfinance banks. However, he argued that the deadline of December 31, 2012, “is not feasible.”

Babajide explained: “Categorisation is also a welcome development. The deadline of December 31st, 2012 is not feasible. We want the deadline to be extended till December 31st, 2014. The sub-sector is not presently attractive to existing and new investors in view of the economic meltdown of 2008 and the license revocation of 2010.

“Mergers and acquisition, 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.”

He hinged his call for an extension of the deadline to 2014, on the expectation that by next year, the CBN support fund, the Nigerian Incentive-based Risk Sharing Agricultural Lending (NIRSAL) fund, and other donor funds would have been disbursed to MFBs. These, he argued, would make the sub-sector very attractive to investors.

Babajide said further: “Under the NIRSAL programme, which is an initiative of the CBN, farmers have already been paired with the branches of MFBs. If such branches are closed, it will be a setback for the programme. This will compound the low productivity in the Agricultual Sector. Nigerians will surely go hungry.

“The Rural Agricultural Programme has already started with the branches of MFBs. If they are closed down, colossal losses will be recorded by RUFFIN, Farmers, Cooperative societies, the host communities and MFBs

“Other initiatives such as the UNDP Solar power, Oando Gas that the branches of MFBs have signed on will automatically collapse. By the Year 2014 the apex association would have put in place very firmly, our self-regulation and supervisory structure which will assist the regulatory authorities in their supervisory roles.”

He insisted that the deadline of December 31st, 2012, if implemented would erode the gains already recorded in the sub-sector, especially its stability.

He declared that MFBs are currently apprehensive because of the pronouncement of the CBN.

Continuing, Babajide said: “They are not sending their staff for the Certification programme which the CBN is spending money on. They are not paying their annual dues, staff members are afraid of Job loss. State Governments are beginning to withdraw their patronage of MFBs. Depositors are afraid. Our regular capacity building cannot be organised because of the fear of another ‘Tsunami’ that may hit the sector.

“Loans have been disbursed by the various branches to customers, whose tenor vary from 30 days to 720 days. If such branches are closed down, that will automatically result into bad debt. Branch closure will reduce the reach out to extend financial services to the poor and under-banked in Nigeria. This will further compound the crime rate in the country.”

But in his opinion, Managing Director/Chief Executive Officer, GTI Microfinance Bank Limited, Mr. Abimbola Adewale, disagreed with Babajide, saying that the banking sector regulator did its best by unveiling the guideline in 2011, which to him was enough time for MFBs to comply.

“CBN has done its best by issuing the policy as far back as 2011 and microfinance banks were given 18 months to comply. So, CBN gave sufficient time for microfinance banks to recapitalise. For me, I think it is a wonderful policy and I don’t see why some people would say that it is not feasible,” the GTI boss said.

Similarly, Managing Director/Chief Executive Officer, Complete Trust Microfinance Bank Limited, Mr. Chinedu Nwogem, who said that the revised guideline would promote stability in the system, also called for an extension of the deadline.

“The December 31, 2012 deadline is not feasible because the industry is just trying to recover from the 2010 intervention which made so many people to lost interest in the sector.

“The CBN should find out those MFBs that have growth potentials and support them because further closure of MFBs would spell doom for the economy,” Nwogem added.
When contacted on the development, Director, Corporate Communications, CBN, Mr. Ugo Okoroafor, said: “We want people to take CBN guidelines seriously. We don’t just give directives; we give directives for people involved to comply with and we have given enough time.”

SOURCE: This Day Live

Nigeria: The new MFBs’ rules: The revival tonic?

By Chijioke Nelson, The Guardian

Like the Mustard seed that rarely grows in many climes, many economic policies in Nigeria have defied survival strategies, or at best, struggled to survive with mixed result. Microfinance banking is one of them. The Central Bank of Nigeria (CBN) just released revised regulatory and supervisory guidelines for the sub-sector. Could this be the needed tonic for the survival of the ever-struggling initiative? CHIJIOKE NELSON highlights some aspects of the new roadmap for the sub-sector.

TO strengthen micro-finance banks in the country, the Central Bank of Nigeria (CBN) released a new set of rules for their operations. The fresh rules are captured under the “Revised Regulatory and Supervisory Guidelines for Micro-Finance Banks (MFBs).”

According to the bank, the potential of MFBs in poverty reduction, economic growth and development in any economy, especially in the attainment of Nigeria’s Vision 20: 2020 cannot be overemphasised, hence resolve to collaborate with other agencies of the government in monitoring the activities of financial corporations and non-governmental organisations that have significant operations due to their micro savings and deposit taking activities.

The collaborating agencies would include Nigeria Deposit Insurance Corporation, Securities and Exchange Commission, National Insurance Commission Corporate Affairs Commission, National Association of Microfinance Banks, Associations of Non-Bank Microfinance Institutions in Nigeria and other relevant agencies shall be promoted to reduce arbitrage in the practice of micro-finance in the country, according to the document.

To incorporate more institutions, the revised guidelines said any of the financial corporations and non-governmental organisations that attainsed a total assets of N20 million or a total membership of 2000 would be encouraged to transform to the relevant MFB.

So, what is a microfinance bank? An MFB, unless otherwise stated, shall be construed to mean any company licenced by the CBN to carry on the business of providing financial services such as savings and deposits, loans domestic fund transfers, other financial and non-financial services to microfinance clients. The bank targets the economically active low-income earners, low-income households, the unbanked and under-served people, in particular, vulnerable groups such as women, physically challenged, youths, micro-entrepreneurs, informal sector operators, subsistence farmers in urban and rural areas.

The loans are usually unsecured, but typically granted on the basis of the applicant’s character and the combined cash flow of the business and household.

The tenure of microfinance loans is usually within 180 days (six months). Tenures longer than six months would be treated as special cases. In the case of agriculture, or projects with longer gestation period, however, a maximum tenure of twelve months is permissible and in housing microfinance, a longer tenure of 24 months is permissible.

In line with best practice, the maximum principal amount shall not exceed N500,000, or one (1) per cent of the shareholders fund unimpaired by losses and/or as may be reviewed from time to time by the CBN. Microfinance loans may also require joint and several guarantees of one or more persons. The repayment may be on a daily, weekly, bi-monthly, monthly basis or in accordance with amortization schedule in the loan contract.

CBN assured that the authorities have taken active measures to ensure efficient and effective microfinance delivery through the development of the appropriate framework based on the particular features and associated risks.

The operations of microfinance banks in the country have been in the front burner in recent years, with controversies and allegations of fraud and mismanagement of depositors’ funds threatening their corporate existence. But CBN, under the administration of Mallam Lamido Sanusi, has insisted on removing anomalies and enforcing sanity in the sub-sector through the ongoing banking reform since 2008.

The MFBs, like the deposit money banks, have been enmeshed in issues of ethics, governance and exceeding of limits allowable in the enabling Acts governing their operations. A retrospective analysis of the operations of MFBs in the country in the last six years, had revealed an urgent need for the revision of the guidelines, perhaps, strengthening the resolve to enforce the rules this time around.

CBN said: “The guidelines that adequately address the features and risks of microfinance would effectively support the orderly development and sustainability of the institutions to enable them to achieve microfinance objectives of financial inclusion and poverty alleviation.

“The implementation of the microfinance policy over the past six years and the experience gained, underscored the need for the review of the existing regulatory and supervisory guidelines. This second edition addresses current realities and developments in the sub-sector. This document is, therefore, aimed at promoting innovative, rapid and balanced growth of the industry, leveraging on global best practice in microfinance banking.

“These guidelines recognise the distinctiveness of micro clients, ownership structure of the institutions, their credit methodology, and the central position of savings/deposits in the intermediation process. It also adopts measures to ensure the soundness and safety of the institutions, and the protection of depositors, especially low-income clients. Also, it defines institution types, loan documentation, portfolio classification, loan loss provision and write-offs, amongst others, and provides the basis for the establishment, operations, regulation and supervision of microfinance banks, and institutions.”

Under the new framework, an MFB shall be allowed to engage in the provision of the following services to its clients:

• Acceptance of various types of deposits including savings, time, target and demand from individuals, groups and associations; except public sector deposits;

• provision of credit to its customers, including formal and informal self-help groups, individuals and associations;

• promotion and monitoring of loan usage among its customers by providing ancillary capacity building in areas such as record keeping and small business management;

• issuance of redeemable debentures to interested parties to raise funds from members of the public with the prior approval of the CBN;

• collection of money or proceeds of banking instruments on behalf of its customers including clearing of cheques through correspondent banks;

• act as agent for the provision of mobile banking and micro insurance services to its clients;

• provision of payment services such as salary, gratuity, pension for employees of the various tiers of government;

• provision of loan disbursement services for the delivery of the credit programme of government, agencies, groups and individual for poverty alleviation on non-recourse basis;

• provision of ancillary banking services to its customers such as domestic remittance of funds and safe custody;

• maintenance and operation of various types of account with other banks in Nigeria;

• investment of its surplus funds in suitable instruments including placing such funds with correspondent banks and in Treasury Bills;

• pay and receive interests as may be agreed upon between the MFB and its clients in accordance with existing guidelines;

• operation of micro leasing facilities, microfinance related hire purchase and arrangement of consortium lending as well as supervision of credit schemes to ensure access of microfinance customers to inputs for their economic activities;

• receiving of refinancing or other funds from CBN and other sources, private or public, on terms mutually acceptable to both the provider of the funds and the recipient MFBs;

• provision of microfinance related guarantees for its customers to enable them have better access to credit and other resources;

• buying, selling and supplying industrial and agricultural inputs, livestock, machinery and industrial raw materials to low-income persons on credit and to act as agent for any association for the sale of such goods or livestock;

• investment in shares or equity of a body corporate, the objective of which is to provide microfinance services to low-income persons;

• investment in cottage industries and income generating projects for low-income persons as may be prescribed by the CBN;

• provision of services and facilities to customers to hedge various risks relating to microfinance activities;

• provision of professional advice to low-income persons regarding investments in small businesses; rendering managerial, marketing, technical and administrative advice to customers and assisting them in obtaining services in such fields;

• mobilise and provide financial and technical assistance and training to microenterprises;

• provision of loans to microfinance clients for home improvement, housing microfinance and consumer credits; and

• performance of non-banking functions that relate to microfinance business development services such as co-operatives and group formation activities, rural industrialisation and other support services needed by micro enterprises.

The document reeled out limitations for the sub-sector’s operations, saying no MFB shall undertake any business other than those permitted as stated in the preceding paragraph or such activities as may be prescribed from time to time by the CBN. Specifically, no MFB shall engage in the provision of the following financial services:

• Acceptance of public sector (government) deposits except for the permissible activities in sub-Section 2.1 of these guidelines;

• foreign exchange transactions;

• international commercial papers;

• international corporate finance;

• international electronic funds transfer;

• clearing house activities;

• collection of third party cheques and other instruments for the purpose of clearing through correspondent banks.

• dealing in land for speculative purposes;

• dealing in real estate except for its use as office accommodation;

• provision of any facility for speculative purposes;

• leasing, renting, and sale/purchase of any kind with its directors, officers, employees or persons who either individually or in concert with their family members and beneficiaries own five per cent (five per cent) or more of the equity of the MFB, without the prior approval in writing of the CBN; and

• financing of any illegal/prohibited activities such as gambling, drug-trafficking, and firearms.

The document also specified the following grounds for revocation of a licence granted to an MFB:

• Submission of false information/data during and/or after the processing of the application for licence;

• the use of proxies or disguised names to obtain a licence to operate as an MFB;

• engaging in functions/activities outside the permissible scope of its licence as specified in Section 2.2 of these guidelines;

• persistent failure to comply with request for information/data in the form required/specified by the CBN;

• engaging in activities prejudicial to the Nigerian economy;

• failure to redeem matured obligations to customers;

• failure to render statutory monthly returns for a continuous period of six months or for a cumulative period of six months in a financial year.

• unauthorised shop closure;

• failure to comply with any directive issued by the CBN;

• engaging in prohibited activities as listed in these Guidelines;

• technical insolvency, for example, where an MFB’s assets are insufficient to cover its liabilities.

• such other conditions applicable to banks and other financial institutions, which constitute a ground for revocation of licence under the Banks and other Financial Institutions Act (BOFIA) 1991(as amended); and

• any other act(s) which in the opinion of the CBN constitute(s) a violation or a serious default.

It is worth re-emphasising that a law on itself is not useful if ignored or brushed aside, while those who should observe it flout it with impunity. The implication of this is that the idea behind the guidelines will be defeated.

It has been observed and affirmed by experts that microfinance has potency in alleviating poverty, while many countries have used it to achieve greater heights. But on its own, those countries would not have succeeded, except that the principles of the supervisory and regulatory guidelines were adhered to.

As a tool in jumpstarting and sustaining small and medium enterprises, the regulatory authorities should also ensure that facilities or loans are advanced with a favourable interest rate, while collaterals for the loans are given such attention too. But the most important is the monitoring of loans advanced to ensure that the proposals for the loans are embarked on, upon the approval and disbursement.

Ethical, professionalism and corporate governance issues should be enforced by all means. That is the essence of the revised rules. Before now, there were such rules bordering on the issues and it should be expected that now, it is re-emphasised, So, the crux of the matter will be on enforcement.

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