Nigeria: Northern govts should facilitate establishment of MFBs – NDIC

By Babajide Komolafe and Rosemary Onuoha, Vanguard Nigeria

The Nigerian Deposit Insurance Corporation, NDIC, has called on northern state governments to facilitate the establishment of microfinance banks (MFBs) in their region, saying that the region has the least number of MFBs in the country.

Managing Director, NDIC, Mr. Umaru Ibrahim, made this call while speaking at NDIC seminar organised for financial correspondents and business editors in Dutse, Jigawa State, last week. He said North East and North West are lagging behind in terms of microfinance penetration, as they have only 32 MFBs, representing 3.68 per cent of the total number of MFBs nationwide.

“To enhance financial inclusion especially in Northern Nigeria, it is imperative for the governors of northern states to therefore encourage and promote the establishment of microfinance institutions in their respective states”, he said

While expressing displeasure on the uneven distribution of microfinance banks in the country, he said of the 869 MFBs in existence, 346 of them, equivalent to 40 per cent of micro banks are located in the South West geopolitical zone. He added that 162 MFBs are situated in the South East, while the North Central has 158. He said that North East and North West on their part has 63 MFBs and 32 MFBs respectively.

Of the total number of provisional and final microfinance bank licences issued by the Central Bank of Nigeria(CBN), northern Nigeria, including Federal Capital Territory(FCT) had only 25 per cent.

Ibrahim said MFBs are globally recognised as veritable tools for financial inclusion as they play a meaningful role to ensure that rural dwellers as well as the economically active poor are engaged in economic activities through financial intermediation.

Microfinance in Nigeria two years after CBN’s intervention

By Graham Orodje

Prior to CBN’s intervention, Microfinance in Nigeria was taking a swift decline into the abyss. The sector was riddled with fraud and mismanagement of funds. Some of the mismanagement may have been down to a lack of understanding of Microfinance by the senior managers in some of the Microfinance Banks. This assumption was corroborated by MFB’s renting lavish offices, providing their senior personnel with salaries and benefits similar to those offered by larger commercial banks. CBN’s intervention was late in coming, but was nonetheless welcomed.

CBN set about evaluating the entire sector and took action to address some of the issues that had plagued it. This included withdrawal of the licenses of some of the MFB it believed were not fit for purpose. CBN also disposed of the one size fits all license and created three licenses; Local, State and National. Each one required different starting capital and on-going minimum capital. Many MFBs recapitalised to meet the new requirement. CBN’s actions to sanitise the sector was complemented by NDIC’s (Nigerian Deposit Insurance Corporation), who commenced a repayment program for depositors of MFBs that had closed as a result of mismanagement or had their licenses withdrawn.

The actions have brought some stability to the sector, although there is still some way to go before the sector can start to fulfil its social remit of financial inclusion and poverty alleviation.

A few problems still continue to plague the sector. The key ones include rates of interest charged by MFBs, location of MFBs and financing.

There have been numerous articles suggesting the levels of interest rates charged by MFBs in Nigeria are too high. They range from 30% to over 60%. This level of interest will demotivate many but the desperate to seek loans from MFBs. The pressure of meeting the repayments with high interest rates can also be counterproductive. Any Microbusiness owners paying these levels of interest will not be able to grow their businesses and improve their lives. The damaging effect of high interest rates caused to Microfinance in India must be noted and not allowed to happen in Nigeria. The interest rates in India were much lower than the ones reportedly charged by MFBs in India, but were still too high and caused many to commit suicides. It is not advocated that interest rates should be regulated, but Microfinance Banks must be continually made aware of the need for responsible lending and the need to ensure interest rates are not excessive.  Any reported excessive interest rates must be investigated by CBN and punitive action must be taken against any MFBs found guilty of excessive profiteering.

Many MFBs are located in urban areas. There needs to be an increase in the number of MFBS located in rural areas. Whilst there is a need for some Microfinance Banks to be located in urban areas, the requirement for rural based Microfinance Banks is much more critical for wider financial inclusion because it is unlikely that larger commercial banks will have any presence in rural communities. Commercial banks should also be encouraged to open accounts for Micro businesses and those of low income.

The stability in the sector has encouraged international Microfinance Investors to provide finance to some MFBs. This is likely to continue as the sector continues to grow and eradicates past errors.

The stability in the sector has encouraged more international Microfinance Investors to provide finance to some MFBs. This is likely to continue as the sector continues to grow and eradicates past errors.

The introduction of a Microfinance Development Fund has been mooted. As yet this has not materialised. When the fund is finally introduced, most of it should be targeted at those MFBs that are either based in rural areas or have a good concentration of their business in rural areas.

Nigeria: CBN faces huge challenge in financial inclusion drive – W/Bank

By Patrick Atuanya, Business Day Online

Nigeria’s financial sector regulators, such as the Central Bank of Nigeria (CBN) and Nigerian Deposit Insurance Corporation (NDIC), have an uphill task in improving financial inclusion in the country. This is evident in the recently released World Bank Global Financial Inclusion Indicators.

Financial Inclusion implies access to a broad range of financial services including payments, savings, credit, insurance and pension products.

The CBN in 2012 rolled out a financial inclusion strategy, aimed at setting a clear agenda for significantly increasing access to and use of financial services in Nigeria by 2020, by which time the bank aims to increase the formal use of financial services to 70 percent, from the current level of 36 percent of the adult population.

The World Bank data reveal the depths of the problem.

The data show that Nigeria under-performs most of its sub-Saharan African (SSA) peers, with the widest disparity being in the category of percentage of adults who borrowed from a financial institution in the past 12 months.

While 24 percent of Nigerians say they have saved in a financial institution in the past year, less than 2 percent have been able to access loans, making Nigeria one of the worst performers in that category in SSA (see chart).

“The high interest rates in the economy have probably contributed to this situation, although there are more fundamental reasons that account for the banks’ reluctance to lend actively and at somewhat affordable rates to the economy,” said Samir Gadio, Emerging Markets Strategist at Standard Bank, London.

“The risk profile of borrowers and long-term infrastructure projects, the focus on Tier-I names at the expense of SMEs and retail banking, as well as the absence of a viable corporate bond market are certainly underlying issues that will need to be addressed for a qualitative shift in the credit market,” he added.

For other analysts though, the high interest rates in the country (which average 23 percent) do not tell the full story, as other structural issues with the Nigerian economy may be at play.

“I think we also need to be realistic about what is contributing to weak real-sector lending in Nigeria. High interest rates are only a part of it,” Razia Khan, head of Africa research at Standard Chartered Bank, said, adding, “Often the problem stems from a high cost structure and the poor viability of SMEs in Nigeria.”

The CBN estimates the formal use of financial services in Nigeria is currently at a low 36 percent of the adult population, roughly 31 million out of an adult population of 85 million.

This figure compares to 68 percent in South Africa and 41 percent in Kenya.

The recent growth of mobile money in countries like Kenya, which has allowed millions of people who are otherwise excluded from the formal financial system to perform financial transactions, has for now not been that successful in Nigeria.

In Kenya, 68 percent of adults report using mobile money, while in Nigeria, the share using mobile money is less than 5 percent, according to the World Bank report.

The data also show that while only 26.67 percent of Nigerians have accounts at a formal financial institution, 42.34 percent of Kenyans and 53.65 percent of South Africans have the same.

Kayode Akindele, Partner at 46 Parallel, an investment firm, says there are many issues inhibiting financial inclusion in Nigeria, such as inability to efficiently and effectively identify and track borrowers and the slow and cumbersome process of adjudicating financial disputes through the courts.

“There are many schemes such as the new national identity card scheme, SIM registration, credit bureaus, etc, being developed to address these issues, but they are all still at their infancy,” he said.

Nigeria: NDIC to sue erring MfBs’ debtors

By Akinola Ajibade, The Nation

The Nigerian Deposit Insurance Corporation (NDIC) is to charge to court erring debtors of 103 microfinance banks in liquidation.

The development follows the refusal of the debtors to pay up – in line with the corporation’s loans recovery and assets valuation programme.

Confirming the development, the Director of Research, NDIC, Mr Ade Afolabi, told The Nation that the court option was arrived at to recover all the debts owed the banks and further put them back on track.

He said the corporation has resolved to collect the debts owed microfinance banks, among other insured deposit-taking institutions.

“As regards the punishment for defaulters, we will charge them to court in order to recover the debts they are owing the liquidated microfinance banks,” he said.

Afolabi said NDIC’s primary concern is to protect depositors, contribute to the stability of the financial system through effective supervision of insured institutions, ensuring that prompt payment of guaranteed sums to the depositors, and making orderly resolution of failed institutions.

He said the financial undertaker has appointed debt collection agents and had discussions with the Assets Management Corporation of Nigeria (AMCON) for the disposal of secured debts of the closed banks.

According to him, the debt recovery agents include lawyers and accountants, among other professionals working with the NDIC.This, he said, are the only people designated to recover debts on behalf of the agency.

On deadline for debtors, Afolabi said none has been fixed for the recovery of all the debts owed the microfinance banks sub-sector.

“We are making the date for the payments of debts open because we want to enable debtors pay whatever they are owing the banks. Though the capacity to pay the debts lies with the debtors of the banks, the need to pay the debts is important. What we are saying is that the debts must be paid back in the interests of the banks”, he said.

In a related development, NDIC has assigned 21 recovery agents for 68 closed MfBs in Lagos. This will be followed by Rivers and Ogun states with three and two agents each for six and four closed microfinance banks respectively.

Oyo State got one recovery agent for four closed MfBs, while Edo State and the Federal Capital Territory (FCT) have one recovery agent for three closed microfinance banks each. The rest are Delta and Enugu states with one recovery agent for two closed MfBs each while Osun State has one recovery Agent for one closed MfB.

The corporation realised N102.6 million from the sale of physical assets, loan recovery and advances owed the banks. Out of the amount, N86.49 million was realised from the sales of chattels while N16.11 million was recovered from debts owed the banks.

Nigeria: Distressed MFBs – NDIC to prosecute directors over N7bn loans

By Nkiruka Nnorom, Vanguard

The Nigerian Deposit Insurance Corporation (NDIC) has said that it has launched investigation into the N7 billion owed the 103 distressed Micro-Finance Banks (MFBs) by their various directors and other managers will bring the full weight of the law to bear on anybody found to be owing them.

The Managing Director, Alhaji Umaru Ibrahim, who made the disclosure in a media parley, Friday, in Lagos, said it was part of the agency’s efforts of riding the financial system of fraudulent practices, arguing that the country’s dream of having a wholesome banking industry would elude her if perpetrators of financial crimes are allowed to walk away free.

“As you are aware, in October 2010, the CBN in collaboration, of course, with the NDIC withdrew the licences of 103 Micro-Finance Banks who has ended up cheating and defrauding depositors as part of exercise to sanitise and get rid of distressed ones.

“The crucial thing is that we are trying to bring to book the directors, employees and any other player of the Micro-Finance Banks that contributed to the downfall of the MFBs. This is where some insiders- directors, managers, employees- abused their positions by regularly taking loans without repaying them. These are the kind of cases we refer to the Financial and Malpractices Investigation Unit, FMIU,” he explained.

Ibrahim further disclosed that the agency has paid N3 billion out of N5 billion owed insured depositors of the distressed MFBs.

He explained that the agency partnered with agent banks of the MFBs concerned in settling the depositors after selling off some assets of the affected banks in order to get money to offset the debts.

“What we did was that we made public announcement nationwide through the media and called on depositors of the Micro-Finance Banks to fill their names with the agent banks. We were involved in the verification exercise and payment at the initial stage, but we later withdrew and left the assignment to the agent banks.”

He noted that the NDIC would in the course of the year conduct on sight inspection of 250 MFBs in the country.

He posited that the country cannot achieve the dream of having a wholesome financial system if individuals that defraud the banking system are allowed to walk away free.

Earlier in his welcome address, the Commissioner of Police of the Special fraud Unit, NDIC, Mr.Tunde Ogunsakin, pledged to ensure that all cases of fraud brought before it by the NDIC, especially as regard the MFBs, were thoroughly investigated and all defaulters brought to book.

“On the Micro-Finance banks the MD talked about, I want to assure you that we will do everything possible to ensure that all cases brought before the SFU are well investigated. We are already putting measures to that effect,” he assured.

“The Special Fraud Unit is going to be proactive in trying to detect crime before the damage is done with the gracious approval of the inspector-General of Police. An intelligent section is being set up to support on-going investigation to reinforce strategic decisions and will be used for basis for initiating a criminal investigation as unravelling major fraud involves thorough investigation which will intelligence will aid,” he further assured.

Speaking further, he said, “you will never stop all crime before it happened but you can potentially stop crime earlier if we can intervene earlier, we can certainly reduce the impact of losses, particularly, the financial issues.”

Nigeria: Police probes N7b debts in microfinance banks

By Collins Nweze, The Nation

The Financial Malpractice Investigation Unit (FMIU) of the Nigerian Police is probing the N7 billion unpaid loans in 103 microfinance banks (MfBs).

Managing Director, Nigerian Deposit Insurance Corporation (NDIC), Umaru Ibrahim, who disclosed this at the weekend, said there is no way the country will have a virile banking system if the perpetrators of financial crimes are not brought to book.

He said NDIC will this year; inspect operations of 250 MfBs to ensure they are operating within international best standards.

Ibrahim said NDIC and FMIU meets regularly to track financial crime cases that needed to be investigated. He said the corporation has paid N3 billion, out of the N5 billion insured deposit to MfB depositors.

The Commissioner of Police, Special Fraud Unit (SFU), FMIU, Tunde Ogunsakin said the force is ready to commence interrogation of the bank chief executives, directors, employees and other principal officers of the banks involved in the loans.

The SFU, he explained, was set up by government as multidisciplinary firm to investigate and prosecute serious financial fraud and corruption. “Our aim is to protect the Nigerian society from sensitive criminal deception, which could threaten public confidence in the financial system,” he said.

He said the unit was created to handle cases reported by NDIC against people responsible for the failure of some banks and financial institutions in the country in an effort to enforce the provisions of the banking and financial regulation. He said the body is also committed to stopping fraud before it happens so as to reduce the impact of losses on financial crime.

Ogunsakin said the SFU is willing and ready to investigate all cases brought to it by the corporation. “The unit is committed to performing its work as assigned by the NDIC , however, the need for training /retraining of its workforce as regards to basic accounting knowledge cannot be overemphasized,” he said.

According to him, the idea is to make such personnel become competent in this age of information technology and globalisation.

Nigeria: NDIC pays 71,000 depositors of closed MFBs

From Business Day Online

The Nigerian Deposit Insurance Corporation (NDIC) says it has disbursed N2 billion to 71,000 depositors of the closed 103 Micro Finance Banks (MFBs) in the country.

The Managing Director of the corporation, Alhaji Umaru Ibrahim, announced this on Saturday at the ‘NDIC Special Day’ at the ongoing 23rd Enugu International Trade Fair.

Ibrahim, represented by the Controller, South East, Mr Gidado Sambo, said arrangements had been made to transfer the payment of the depositors through eight agent banks across the country. The banks are First Bank, Access Bank, Unity Bank, Mainstreet Bank, Union Bank, Wema Bank, UBA and Zenith Bank.

The MD also disclosed that the corporation had paid N3.3 billion out of the N5.2 billion insured deposits of 35 deposit money banks that were liquidated since 1994. “We also paid N6.1 billion out of the N11.5 billion liquidation dividend that was declared to depositors of 35 deposit money banks,’’ he said.

Ibrahim said that in order to enhance public confidence, the board increased the deposit insurance coverage level from N200,000 and N100,000 to N500,000 and N200,000 respectively for deposit money banks and MFBs. According to him, the new coverage level was used to settle depositors of the 103 MFBs closed in 2010.

The chief executive officer said the NDIC had mapped out strategies to enhance public awareness of its mandate and activities. They include the development of a website and establishment of toll-free 24-hour help desk. He commended the organisers of the fair, saying that it would help in attaining the transformation agenda of President Goodluck Jonathan.

In his remarks, the ECCIMA President, Dr Theo Okonkwo, commended NDIC for the role it played in protecting depositors’ funds. Okonkwo, however, urged the corporation to increase the compensation paid to depositors of distressed bankers. He also urged the CBN to ensure that the rate of failed banks was reduced to save depositors from going through harrowing experience.

Nigeria: NDIC denies owing failed banks’ depositors

By Wale Ajetunmobi, The Nation

The National Deposit Insurance Corporation (NDIC) has denied owing depositors of failed banks.

The corporation, in a reaction to a report said it has performed its function creditably well.

The statement signed by its Head, Communication and Public Affairs, H. S. Birchi noted that “as one of the nation’s financial safety-net participants, the Corporation has since its inception in 1989 been very much alive to its statutory mandate and committed to depositor protection. It has also been contributing to the safety, soundness and stability of the financial system; as such, the case of the 13 banks closed in 2006 was no exception.”

The statement reads: “At the completion of the bank consolidation programme in 2005, the 13 banks mentioned in the article had their licences revoked by the CBN following their failure to meet up with the CBN N25billion recapitalisation requirement. Consequently, rather than face outright liquidation, NDIC adopted the Purchase & Assumption (P&A) as a failure resolution option to protect the interest of depositors with the exception of Fortune Bank and Triumph Bank whose shareholders challenged the revocation of their banking licences in courts. In addition, the Federal Government, through the CBN, provided blanket guarantee to all private sector depositors.

“Under the P&A arrangement, the deposits of all the private depositors of 11 of the13 affected banks were transferred to four (4) of the 24 healthy banks which met the CBN recapitalisation requirement and also showed interest in acquiring part of the assets and assuming part of the liabilities of the affected banks. The healthy banks acquired the respective closed banks through competitive bidding.

“The NDIC paid the insured portion of the depositors’ funds which were transferred to the assuming banks, thus guaranteeing their continuous transactions with the assuming banks. This gave the affected depositors easy access to their funds without conditions. For being one of the 11 banks, the defunct Gulf Bank was acquired by UBA Plc and all the deposit liabilities were assumed by the UBA. It is therefore very unfair to claim that any depositor of the defunct Gulf Bank had lost his/her entire deposit. In addition and as a result of the blanket guarantee provided to all private sector depositors, a total sum of N66.757 billion had been paid to those depositors as dividend through their respective assuming banks. Besides, out of the 48 banks whose licences were revoked by the CBN since 1994, NDIC had successfully handled the liquidation of 45 as at December, 2011.

“Furthermore, the Corporation had commenced payment of the insured sums to the affected depositors of the defunct Peak Merchant Bank, Triumph and Fortune Banks in order to reduce their agonies before the litigations brought by their shareholders were concluded. A total of N26.29million had been paid to depositors of the defunct Fortune Bank, the sum of about N2.5 million had been paid to insured depositors of Peak Merchant Bank while another sum of N1.63million had been paid to depositors of the erstwhile Triumph Bank as at the end of December 2011.It is therefore a misrepresentation of the facts to say that the NDIC did nothing to address the travails of the affected depositors and also pretended that the Corporation was not restrained by the suits from paying depositors of the bank.

“Besides, as we speak, all the depositors whose names are genuinely in the deposit registers of any of the 11 closed banks and they are yet to file their claims are free to do so in the respective assuming banks listed above.

“For the NDIC therefore, the issue of depositors of failed banks appealing to it for the payment of the insured sums in the event of failure of any bank has never arisen because the Corporation has always been up and doing in prompt payment of insured deposits.

“On the issue of the N12billion, it is instructive to state that the Federal Government did not at any time set aside N12billion or any other amount for the purpose of payment of the depositors of the 13 banks closed in 2006.It is also worthy to note that the Corporation had since 2010 increased the maximum insured amount from N200,000 to N500,000.00 to depositors of failed deposit money banks (DMBs)and from N100,000 to N200,000 to depositors of microfinance banks (MFBs) and primary mortgage institutions (PMIs).For depositors whose deposits fall above the insured sums, the Corporation usually arrange to settle their balances as liquidation dividends from the proceeds realised on the sales of physical assets of the failed banks and recovery of loans owed to the failed banks and not from any fund set aside by the Federal Government.”

Nigeria: MFBs trade with caution as debtors face recovery agents

By Hope Moses-Ashike, Business Day Online

Microfinance banks will now have to trade with caution, following the appointment of debt recovery agents for those institutions in liquidation by the Nigerian Deposit Insurance Corporation (NDIC).
Microfinance banks across the country are faced with the challenge of bad debt which calls for urgent attention by stakeholders.

Operators see the action of the NDIC as a healthy development, as it sends positive signal to depositors and investors.
To Olufemi Babajide, chairman, NAMB, Lagos chapter, customers should know that they are liable to pay their loan. “It gives assurance to depositors and investors that they will not lose their money. It is a positive signal to customers,” he said.
He further noted that the biggest challenge of microfinance banks was that customers borrow money but refuse to pay, hiding under the law that favours them.

Babajide appeals to the regulatory authority to, in addition to capacity building, support microfinance banks with debt recovery measures.
The NDIC last week appointed debt recovery agents (DRAs) for microfinance banks (MFBs) in liquidation to fast track recovery of debts owed to the 103 closed MFBs nationwide.

According to the Corporation, Lagos State has the highest number of 21 recovery agents for 68 closed MFBs followed by Rivers and Ogun States with three and two agents each for six and four closed MFBs, respectively.
Similarly, Oyo State has one recovery agent for four closed MFBs while Edo State and Federal Capital Territory (FCT) have one recovery agent for three closed MFBs each.

The rest are Delta and Enugu States with one recovery agent for two closed MFBs each, while Osun State has one recovery agent for one closed MFB.
A total sum of N102.6 million has so far been realised from the sale of physical assets and recovery of loans and advances owed to the 103 closed MFBs. Out of the amount, the sum of N86.49 million was realised from the sales of chattels while N16.11 million was recovered from debts owed to the 103 closed MFBs.

Meanwhile, the corporation has called on all debtors of the 103 closed MFBs to settle their debts or face the full wrath of the law. The debtors have also been advised to crosscheck the names and addresses of the recovery agents assigned to the banks they are indebted to and make necessary arrangements to offset their debts.

Babajide earlier said the CBN should help microfinance banks set up something like Asset Management Corporation of Nigeria (AMCON) that will buy their bad debt, and subsequently they will repair over a period of time.
“We need a company that can buy up our debt. So the CBN should help us set something like AMCON. You know that big banks’ loans are collaterised, so they are able to sell all these loans to AMCON.

In our own case, they are not collaterised. So all they can do for us is to buy them up and then give us liquidity so that we can repay over a period of time.

Nigeria: NDIC appoints 30 agents to recover debts in liquidated microfinance banks

By Bassey Udo, Premium Times

The Nigeria Deposit Insurance Corporation (NDIC) has released the list of 30 agents it has appointed to recover debts owed by various customers of the 103 liquidated microfinance banks (MFBs) in the country.

The NDIC said today that the appointment of the agents was aimed at fast-tracking the debt recovery process from the defunct banks.

A breakdown of the appointments indicates that 21 recovery agents have been assigned to cover 68 closed MFBs in Lagos State, while three are to handle the assignment in six MFBs in Rivers state and two in four closed MFBs in Ogun States.

One agent has been mandated to pursue debtors in four closed MFBs in Oyo State, while one each is to oversee three MFBs each in Edo State and the Federal Capital Territory (FCT).

Similarly, Delta and Enugu States have one recovery agent each for two closed MFBs, while Osun State has one recovery agent for one closed MFB.

Head of Communications/Public Affairs, Hadi Birchi, said about N102.6million has so far been realised from the sale of physical assets as well as drives to recover loans and advances owed to the 103 closed microfinance banks.

Of the amount, Mr. Birchi said about N86.49 million was realised from the sale of chattels, while N16.11million came from debts recovered from various categories of debtors to the affected banks. In sum, the corporation has recovered a cumulative sum of N22.263billion owed 34 banks in liquidation between 1994 and December 31, 2011.

“All debtors to the 103 closed MFBs must come forward to settle their debts or face the full wrath of the law,” the NDIC warned.

Mr. Birchi said the debtors have also been advised to crosscheck the names and addresses of the recovery agents assigned to the banks they are indebted to and make necessary arrangements to offset their debts.

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