There are strong indications that about 70 percent of 900 Microfinance banks (MFBs) may not have met the recapitalisation requirements of the Central Bank of Nigeria (CBN) BusinessDay has gathered.
Investigation by Businessday show that majority of the Unit licence MFBs are affected. There are over 800 Unit MFBs, about 20 State licence MFBs and about three National licence MFBs.
The CBN had given all existing microfinance banks till last December 31, 2013 to shore up their balance sheets.
The affected microfinance banks are currently awaiting the Apex bank’s hammer for inability to meet up with the capital requirement.
The CBN had categorised microfinance banks into three categories which include Unit licence MFB with minimum capital requirement of N20 million, State licence MFB which requires minimum of N100 million to operate, and National licence MFB which requires N2 billion as capital requirement.
Analysts are of the view that except there is an alternative way of bailing these failing micro institutions, it could lead to another crisis in the sub-sector.
Interactions with some microfinance banks across the country show that two out of three failed to meet their capital requirements.
One of the microfinance operators who now runs a consulting firm told BusinessDay that majority of the Unit licence MFBs would be affected because they are making profit. “As they are not making profits, they are not injecting money in their banks”, the source said. The source said the reason big MFBs are not accepting acquisition proposal from weak ones is that the capital base of the weak ones are negative.
One of the operators who preferred to be anonymous disclosed to BusinessDay that he has not met his recapitalisation requirements because he could not raise the required funds to shore up his balance sheet.
He decried that customers who took loans from his bank were not able to repay. He was prepared to face whatever action the regulator would take against his bank. The operator lamented that one of the big microfinance banks that was making effort to acquire his bank had problems along the line, leading to failure of the acquisition process.
“They need to encourage us, give us money to on-lend to the low income earners and at the end of three years they will collect their money back. We try to raise money but people are complaining that there is no money in the economy”, he said.
In his response, Jethro Akun, president National Association of Microfinance Banks (NAMB) said recapitalisation is a continuous exercise. He said what the CBN has done was to allow Unit MFBs to operate one branch within their local government of operation. However efforts to reach Olufemi Fabanwo, Director, Other Financial Institutions Department (OFID), CBN, were abortive, as he did not answer series of calls put across to him.
The examination of 792 of the MFBs in operation by the CBN in the second half of 2012 showed that 68.3 percent of the institutions met the capital adequacy ratio (CAR) of 10 percent, while 82.4 percent complied with the minimum liquidity ratio (LR) of 20 percent.
The average LR of the institutions was 62.3 percent, which exceeded the prescribed minimum LR of 20 percent.
According to the CBN, poor asset quality remained the bane of MFBs, as their non-performing loans (NPLs) represented 61.9 percent of the total loan portfolio, as against the regulatory benchmark of 5 percent.
This was attributed to the fact that most of the institutions were yet to articulate their risk management frameworks.
The Nigeria Deposit Insurance Corporation (NDIC)’s 2012 annual report and statement of account shows that capital adequacy ratio of 576 out of about 878 of microfinance banks are below 10 percent benchmark of the regulator.
According to the report, as at December 2012, 310 out of the 323 microfinance banks that rendered returns had met the minimum paid-up capital of N20 million.
A total of 302 microfinance banks had capital adequacy ratio of more than 10 percent. The remaining 555 did not render returns and that situation continued to be a source of concern to NDIC, as it was impossible to assess their financial condition and performance on a continuous basis during the year under review.
HOPE MOSES-ASHIKE
