When CBN repositions microfinance banks for real sector growth

When CBN repositions microfinance banks for real sector growth

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The vision of the Central Bank Nigeria (CBN) under the leadership of Godwin Emefiele, governor, is to create a people-centred Central Bank, delivering price and financial system stability as well as promoting sustainable economic development.

“We will collaborate with commercial banks to significantly improve the credit culture in the Nigerian banking system”, Emefiele said in his maiden speech as he assumed office in June 2014.

It was on this basis that the CBN and the bankers committee agreed in December to establish a national Microfinance bank across the 774 local governments, leveraging the Nigerian Postal Service (NIPOST).

Microfinance is about providing financial services to the economically active operators of the base of the income pyramid who are either undeserved or not served at all by conventional financial institutions.

Consistent with its developmental role the CBN in 2005 formulated the Microfinance Policy, Regulatory and Supervisory Framework. The policy was aimed among other at bringing microfinance institutions and activities into greater focus in order to deepen financial inclusion and alleviate the financing needs of micro, small and medium enterprises (MSMES).

The CBN since then worked towards increasing access to financial services for the economically active poor in order to enhance job creation and poverty reduction. The target is to increase the share of micro credit as percentage of total credit to at least 20 percent by 2020.

To further deepen the understanding of the media on the policy and other CBN’s policies and interventions for the benefit of the society, the CBN last week engaged finance correspondents and business editors, in capacity building focusing on the theme, “Repositioning Microfinance Banks for Real Sector Growth”.

Recently, the Bank took some actions including a thorough review of the subsector, increased surveillance and revocation, where necessary. These measures were intended to revitalise the sector, ensure the institutions remain mission-focused and to grow public confidence in sub-sector.

“In a developing economy like ours the link between microfinance and the real sector is quite strong. Microfinance banks are conceived to serve as critical financial lubricants for the real sector, which is the pillar of sustained economic growth. At the moment economic policy in Nigeria faces a major challenge of reviving growth which is the (only) sure path to ending pervasive poverty. Microfinance has worked in this regard in many climes and promises to work in Nigeria, if we get it right”, Emefiele said in his keynote address at the seminar.

Represented by  Edward Lametek, deputy governor, corporate services, he said the Bank remains committed to the economic empowerment of disadvantaged groups including women and actively seeks to achieve this through the instrumentality of microfinance amongst other initiatives.

At the seminar, Emefiele disclosed that an aggregate loans granted by MFBs was N482.896 billion and that loan sizes that are below N 1.4 million accounted for 72 percent of the total.

According to him, data from the licensed credit bureaus indicated that the operations of micro finance banks have helped to improve financial inclusion amongst smallholder peasant farmers.

However, the challenges remain, inadequate spread in the location of the MFBs in relation to their target beneficiaries, demand for immoveable collaterals for loans, high interest rate, and absence of a credit reporting system.

“We are committed and working assiduously to address these limitations”, Emefiele said, adding that the Bank, in collaboration with other agencies of Government, is implementing various intervention schemes in addition to promoting microfinance.

The Bank, he said has since then worked towards increasing access to financial services for the economically active poor in order to enhance job creation and poverty reduction. The target is to increase the share of micro credit as percentage of total credit to at least 20 percent by 2020.

Tokunbo Martins, director, Other Financial Institutions Department, CBN, noted that the regulator is doing a lot to derisk the sub-sector by introducing collateral registry and credit bureau to enable them to lend to potential borrowers.

In 2008 the CBN released the guidelines for the licensing, operation and regulation of credit bureaus, which was revised in 2013. The objective of the guideline is to define the licensing, operational and regulatory requirements for a privately owned credit bureau under the CBN Act 2007, No. 7.

Also, in 2015 the CBN created the National Collateral Registry (NCR), which enables easy access to credit by small businesses.

Earlier in the year, Emefiele noted that as at January 31, 2019, 628 financial institutions comprising 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies had been registered on the Registry’s portal.

Speaking during the colloquium on the topic, ‘Real Sector Credit Delivery: Catalyst for Sustainable Economic Growth’, Isaac Okorafor, director, corporate communications department, expressed happiness that the CBN is working with the bankers committee, NIRSAL, and NIPOST to realize the national Microfinance bank project.

Responding to questions on loan refinancing, he said no refinancing is allowed rather through supply side they will push credit into the sector to bring down interest rate.

The CBN in collaboration with the bankers committee agreed in December 2018 to establish a National Microfinance Bank using NIPOST outlets in 774 local governments.

In the National MFB establishment plan, the CBN and the Bankers Committee will utilize the sum of N5 billion as equity from N60 Billion Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS) Fund, while NIPOST will contribute its offices in the 774 local governments.

However, this was not welcomed by microfinance operators as they opined that that the decision runs counterproductive to the salient objectives of the National Microfinance Policy, Regulatory and Supervisory Framework for Nigeria as well as the objectives of the National Financial Inclusion Strategy.

The leadership of NAMB led by Rogers Nwoke, president, had said in a statement the CBN and the Bankers Committee should utilize existing touch points and offices of existing microfinance banks which meet approved criteria to disburse its intervention funds including but not limited to the ACGSMEIS, Micro Small and Medium Enterprises Development Fund (MSMEDF).

Reacting to concerns on the national microfinance bank -NIRSAL MFB crowding out the existing microfinance banks, Emefiele said, “the existing microfinance banks are doing their best. I have heard this is an attempt to crowd them out. This is not an attempt to crowd them out but to complement their services and see to it that whatever service is being provided by these microfinance banks should be seen to be fair to their customers.”


Hope Moses-Ashike

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