The Nation Newspaper

Tag: MfBs

  • CBN won’t relax control of MfBs, mortgage firms, others

    The Central Bank of Nigeria(CBN) will continue to monitor Development Finance Institutions (DFIs) for growth this year.

    In a report on activities of Other Financial Institution Department (OFID) on its website, it said the aim of monitoring CBN primary mortgage banks, finance houses, microfinance banks, among others, grouped under DFIs is to see whether they are in order.

    CBN said: “The aim of monitoring DFIs is to institutionalise strong corporate governance and risk management programmes in those firms. The exercise will enable the companies to effectively deliver on their mandates. The bank shall also continue to enforce the Uniform Prudential and Assessment Standards prescribed for DFIs in Africa, developed under the aegis of the Association of African Development Finance Institutions (AADFI) for benchmarking operations of the DFIs.

    “All Other Financial Institutions (OFIs) are required to strictly comply with the prudential requirements specified in the existing guidelines/circulars, directives and provisions of BOFIA CAP B3 Laws of the Federation of Nigeria, 2004. Appropriate sanctions shall be imposed on any OFI found in contravention of the prudential guidelines, circulars, directives or provisions of the BOFIA, 2004.”

    The CBN also said it would sustain the implementation of the Microfinance Certification Programme for Microfinance Banks (MfBs). It added that it would continue to license microfinance banks in line with the prescribed new capital regime of N20 million, N100 million and N2 billion for unit, state and national microfinance banks.

    The apex bank said it is introducing specialised second-tier institutions that would provide short-term liquidity, long-term funding or guarantees to mortgage banks and housing finance providers.

    According to CBN, reforms of the primary mortgage banks shall, among other things, target the enhancement of access to mortgage/housing finance, introduction of sound risk management, strong corporate governance and the promotion of secondary mortgage market.

     

  • Why some MFBs could not recapitalise

    Why some MFBs could not recapitalise

    MANY microfinance banks (MfBs) could not recapitalise because of the non-implementation of the 2005 MfBs’ framework of the Central Bank of Nigeria (CBN) by the government, the Managing Director, Support Microfinance Bank, Sunny Akahmiorkhor, has said.

    He said most of the microfinance banks that closed shop would have survived while those existing as unit MfBs could have grown to state and national MfBs, if the Federal Government and Development Finance Institutions (DFIs) had rescued them.

    He said some of the MfBs, which failed to meet the December 31, 2012 deadline set by the apex bank, have relapsed into unit status, which requires only N20 million as against state MfBs and national MfBs, which require N100 million and N2 billion.

    He regretted that the MfB framework set by the CBN that required state and local governments to contribute one per cent and five per cent of their annual budget respectively to MfBs operations is not being implemented. The contributions are supposed to be part of their equity holdings in such MfBs.

    He said the governments’ non-commitment to the operations of MfBs has made it difficult for leading DFIs, such as the International Finance Corporation (IFC), International Development Bank (IDB), and Department for International Development (DFID) to commit funds to MfBs. He said DFIs are expected to give grants to MfBs to fund their operations.

    Akahmiorkhor, said the bank should also extend other cost-cutting measures, including reducing commission on turnover (CoT) and other banking costs that burden the subsector’s operations.

     

     

  • Mfbs sell shares to recapitalise

    Mfbs sell shares to recapitalise

    SOME operators of microfinance banks (MfBs) are selling their shares to meet the recapitalisation deadline imposed on them by the Central Bank of Nigeria (CBN), The Nation has learnt.

    It was gathered that the banks are seeking higher bidders in the subsector as the clamour for the extension of the deadline to December 2014 continues.

    The Chairman, National Association of Microfinance Banks(NAMBs), Mr Olufemi Babajide, confirmed the development, saying the liquidity squeeze in the industry has made it imperative for operators to seek a new lease of life.

    Babajide said sales are ongoing in the sub-sector, adding that the pace is slow because of lack of funds.

    He said: “ Merger and acquisition, outright sales are going on among the banks, but the pace has been slow because of lack of funds and the need to carry out due diligence. The subsector is not attractive to existing and new investors in view of the economic meltdown of 2008, and the revocation of the licences of some of the banks in 2010.”

    He said the categorisation of the banks in line with the required capital base is a welcome development, adding that the banks want the deadline to be extended to December 2014.

    According to him, the CBN’s support fund, NIRSAL fund and others would have been disbursed to MfBs. This, he said, would make the banks attractive to investors.

    “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 agricultural sector, and Nigerians would go hungry” he added.

     

     

     

     

     

  • Why MfBs’ can’t recapitalise

    • Expert blames govt, DFIs

    Why did many microfinance banks (MfBs) fail to meet the December 31, last year deadline, for their recapitalisation? It is because the Federal Government and Development Finance Institutions (DFIs) did not come to their aid, says Managing Director, Support Microfinance Bank Sunny Akahmiorkhor.

    The MfBs were required to recapitalise with N20 million; N100 million and N2 billion, according to their category.

    Akahmiorkhor regretted that the MfBs framework, which requires state and local governments to contribute one per cent and five per cent of their annual budget to MfBs operations was not being implemented.

    He said the government’s non-commitment to MfBs’operations made it difficult for leading DFIs, such as the International Finance Corporation, International Development Bank (IDF) and Department for International Development (DFID), to assist MfBs.

    The Central Bank of Nigeria (CBN) has accused MfBs of being deficient in their understanding of micro financing. It said poor corporate governance and a high level of non-performing loans, among others, are also key challenges facing the subsector. According to CBN’s operational guidelines for the establishment of microfinance banks, they are not expected to engage in excessive spending.

    Last month, it warned that the deadline for recapitalisation would not be extended. In a circular, Director, Other Financial Institutions of CBN, O.A. Fabanwo, said it was exigent to remind directors and shareholders of the deadline.

    Fabanwo advised the MfBs to conduct due diligence and seek professional legal and financial advice.

    Many of the MfBs liquidated by the Nigeria Deposit Insurance Corporation (NDIC) ran into trouble when their debtors refused to pay back their loans, over 80 per cent of which were unsecured. Besides, some of the MfBs were taking excessive risks, and branching out too quickly without considering resources at their disposal and whether loaned funds were for short or long term obligations.

    A unit MfB bank is authorised to operate in one location without branches/cash centres and is required to have a minimum paid up capital of N20 million; its state counterpart is expected to have a minimum paid up capital of N100 million. It is allowed to open branches within the same state or the Federal Capital Territory (FCT).

    But the national MfB is authorised to operate in more than one state, including the FCT. It is 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, though subject to the approval of the CBN.

  • Discount Houses, others’ assets hit N557b

    TOTAL assets and liabilities of five discount houses and the microfinance banks (MfBs) stand at N557.1 billion, The Nation’s findings have shown.

    The Central Bank of Nigeria (CBN) report on the state of assets in the sector showed that at the end of June 2012, assets of five discount houses increased by 30.7per cent to N361 billion, compared with N276.2 billion recorded, in the corresponding period of 2011.

    Also, assets of the MfBs stood at N196.5 billion, representing an increase of three per cent above the level at the end of December 2011. The report said aggregate reserves decreased from N2 billion to negative N1.6 billion while investible funds amounted to N53.3 billion.

    For the discount houses, the total funds sourced amounted to N46.2 billion, compared with N12.9 billion last year.

    The funds were sourced from claims on Federal Government which amounted to N38.3 billion; increase in borrowings, N3.5 billion and other liabilities, N4.4 billion.

    “Discount houses investments in Federal Government securities of less than 91 days maturity amounted to N70.8 billion at end of June 2012, representing 25.5 per cent of their total deposit liabilities. This was 34.5 percentage points below the prescribed minimum of 60 per cent for fiscal 2012,” it said.

    In the MfBs subsector, the funds, which were sourced from increase in deposit liabilities amounted to N18.1 billion; reduction in placements with banks, N15.1 billion and other liabilities were worth N12.7billion.

    Funds used to redeem placements from banks amounted to N19.4 billion, increase loans/advances cost N18.9 billion and short-term investments, N5.4 billion.

  • MfBs’ deadline to recapitalise ends today

    Many microfinance banks (MfBs) are yet to close their branches and cash centres in defiance of the recapitalisation deadline set by the Central Bank of Nigeria (CBN)

    The apex bank gave today as the last day for MFBs fo recapitalise or close shop.

    Sources said some of the banks want to make more revenue, hence their decision not to close their branches.

    They said the development runs contrary to the provisions of the Revised Microfinance Policy Frameworks of CBN, which stipulates that certain category of banks must close their branches before recapitalisation. The issue, they said, attracts sanctions depending on the level of recapitalisation required

    A Director, Other Financial Institutions Department (OFID), CBN, Mr Olufemi Fabanwo, said failure of the banks to comply with the provisions of the revised guidelines would attract punishment.

    Citing the guidelines, Fabanwo said erring banks would be penalised.

    He said: ”It is also pertinent to know that the penalty for operating a branch or cash centre without prior approval of the CBN, as stipulated in Section 13.1(b) of the Revised Guidelines for MfB is N250,000, N500,000 per branch for  a unit and state MfB, and N1million for a national Mfb.“

    He said the apex bank would not entertain a waiver, a reduction of penalty or extension of compliance deadline.

    Chairman, National Association of Microfinance Banks (NAMBs), Southwest Region, Mr Olufemi Babajide, said the banks have been trying to abide with the CBN’s directives.

    However, Babajide said the banks are law-abiding, and would not like to incur the wrath of the CBN, adding that the operators know that they are bound by the CBN rules. He assured that they would comply with the CBN’s directive.

    Babajide’s predecessor, Mr Mathias Umeh, said the banks are trying to abide by the guidelines, adding that the banks have begun merger talks as an option to get the required capital base.

    He said the aim is to meet the deadline to avoid sanctions fromthe apex.

  • MfBs record N5.8b loss

    • CBN urged to extend Dec. 31 recapitalisation deadline

    A microfinance banks recorded a loss of N5.8 billion last year, the Central Bank of Nigeria (CBN) has said.

    Speaking at a forum organised by the National Association of Microfinance Banks (NAMBs) in Lagos, a senior staff member of Other Financial Institutions Department, (OFID), CBN, Mr David Adelana, said despite the loss, the banks are determined to improve and engender economic growth.

    He said: “Based on the CBN’s report, the microfinance institutions have significantly reduced their losses from N11 billion in 2010 to N5.8 billion in 2011. This is, in spite of various odds in the sub-sector and the economy in particular.”

    He said the apex bank introduced the Know Your Customer (KYC) policy to mitigate risks in the industry, advising the banks to apply stricter measures to safeguard depositors’ funds.

    He said certain commercial banks contend with a lot of dormant accounts because their owners are not bothered.

    “First Bank and Union Bank are having many dormant accounts. “The reason is because people that opened these accounts do not come back to operate them. This is one of the reasons behind the introduction of KYC guidelines. It is now left for banks to put in place customer due diligence in place to control risks,” he added.

    MfBs have called on CBN to extend the recapitalisation deadline by one year. The operators said the December 31, deadline is not feasible because of the poor state of the sub-sector, urging the banking watchdog to extend the deadline for recapitalisation to December 2013.

    Reacting to the CBN’s circular entitled: “No deadline extension for Microfinance Banks and Primary Mortgage Institutions” dated December 20, 2012, the Chairman, NAMBs, Southwest Region, Mr Olufemi Babajide, said the banks had no choice but to seek an extension of the deadline. Babajide said though some banks have agreed to merge operations to get the capital base of N20 million, N100 million and N2 billion, they are still facing liquidity problems.

    He said operators were making efforts to get the required capital and further escape CBN’s hammer.

    “It is not that the banks are not taking the recapitalisation issue seriously. Since 2011, when the CBN imposed a multi-phase and flexible capital regime on operators, efforts are being made to ensure that operators recapitalised based on their capacities. However, liquidity squeeze has stalled the ambition of the operators to recapitalise and play at either local, state and national level as contained in the recapitalisation guidelines set for the banks,” he said.

    The association’s former National President, Mr Mathias Umeh, said recapitalisation is germane to the growth of the sub-sector. He said operators still have more time to shore up their capital base for growth. He said strategies on how to meet the capital base have been evolving among the operators since last year.

    He advised operators to double their efforts to recapitalise their operations, in case CBN extends the deadline.

    He said mergers and acquisition process continues in the sub-sector, stressing that the bigger banks are entering into agreements with the smaller ones to form bigger and stronger institutions.

  • MfBs negotiate CoT with banks to cut costs

    MfBs negotiate CoT with banks to cut costs

    Microfinance banks (MfBs) are negotiating with banks for a concessionary Commission on Turnover (CoT) to enable them reduce the rising cost of operations.

    Managing Director, Seed Capital Microfinance Bank, Gbenga Komolafe, made this known during a meeting organised for MfBs by Sterling Bank Plc in Lagos.

    He said some of the banks that had granted concessions on turnover for the MfBs reneged on the agreement, thereby raising the cost of operation for the subsector. He said merged and acquired banks were the worst affected because the new owners denied having anything to do with the concession.

    “We have seen this happened in several cases, especially in merged and acquired banks. They have always denied there were concessions at any time before the merger or acquisitions,” he said.

    Komolafe said some of the banks that retained the concession usually give COT target to MfBs, which is usually above their financial capabilities.

    Managing Director, Sterling Bank Plc, Yemi Adeola, said commercial banks and MfBs could always agree on things that will reduce their cost of operations including CoT slash.

    He said his bank is proactively positioning its key customers in the subsector to benefit from the N220 billion intervention funds from the Central Bank of Nigeria (CBN) expected to be launched this week.

    Other opportunities that the MfBs can key into include the N5 billion small business development funds, $4 million renewable energy project, and another $200 million provided by Ford Foundation to enable MfBs increase their market penetration.

    He said banks concentrate on big customers, not understanding that 50 to 60 per cent of finance in the economy usually comes from the Small and Medium Scale Enterprises (SMEs). He said unless banks refocus on SMEs, the economy will not grow.

    Noting that massive investment is needed to run a bank, the Sterling Bank boss said the lender is committed to channel some of its products and services as well as dedicate competent staff to meet the business needs of MfBs.

    He said the MfBs need enabler, in terms of commercial bank to be able to access the funds and other intervention funds from the apex bank to the subsector. He said there is also a N600 billion agricultural development fund, which the bank has given opportunities for several customers to benefit from.

    Chief Finance Officer, Sterling Bank, Abubakar Suleiman, said the bank believes in strategic partnership and is partnering with some MfBs in relation to electronic business, agricultural finance among others. “We identify with the brand promise of MfBs and believe there is need to leverage on technology to increase their retail penetration and enable their customers enjoy electronic banking facilities,” he said.

    Consequently, he said the bank will be assisting the MfBs on co-branded card issuance, e-payment inflows, global teller, Automated Teller Machine (ATM) deployment and mobile banking. Such services, he said, would enable the bank increase customer patronage, enhance deposits, revenue and boost efficiency through automation of operations.

    He said the bank has increased its exposure to the agricultural sector and will continue to do that going forward.

    Managing Director, Support Microfinance Bank, Sunny Akahmiorkhor, said the step taken by the bank is commendable. He said the process of achieving intervention funds from the CBN has been hectic for the susbsector, adding that the move by Sterling Bank to mediate between the MfBs and CBN on the intervention funds will address such hitches.

  • Surge in MfBs fraudulent e-mails, says CBN

    Surge in MfBs fraudulent e-mails, says CBN

    •Customers get N4.3b refund

    FRAUDULENT e-mails in the microfinance bank sector have been on the increase, the Central Bank of Nigeria (CBN) has said.

    The apex bank said the sector recorded and processed 10,845 e-mails on various financial crimes.

    The crimes, which include cheques knitting, forging of banks’rubber stamps, letter headed papers, and signatures of the managing directors of the over 700 microfinance banks were committed in the past few years.

    Other Financial Supervisory Institutions Department, CBN Examiner, Mr David Adelana, disclosed this during a conference organised by the National Association of Microfinance Banks (Southwest Zone) in Lagos.

    He said the crimes were mainly advanced fee fraud.

    He delivered a paper entitled: Frauds and forgeries in microfinance banks: causes, detection and control.

    Adelana said the number of fraudulent cases reported against the banks fell by 3,433 from 5,960 in 2010 to 2,527 in 2011. He said the number of complacent cases recorded and treated was 1,526 in 2010 as against 1,800 in 2011.

    He said the refund to customers was N4.3billion in 2011, as against N2.2billion in 2011, adding that the apex bank has put in place institutional frameworks to check sharp practices in the industry.

    He divided the perpetrators of the criminal activities into three groups, namely internal, external and mixed. He said the internal group relates to the financial crimes committed by the staff of the banks, while the external group has to do with non-staff of the banks, while the mixed group includes the staff and non-staff of the banks.

    According to him, CBN has organised capacity building programmes for the management of the banks to prevent undue exposure to risks. He said the banks have been directed to provide measures that would prevent poor management of funds and further check unwholesome practices.

    He said: “We have said it times without number that banks must tightening control on dormant accounts. Dormant accounts should be transferred to the table of the managing directors of the banks, and not information and technology (IT) among other ordinary members of staff to prevent manipulation. To ensure firm control of dormant accounts, the managing directors and the IT section should be allowed to have access to dormant accounts in the banks.”

    On cheques knitting, Adelaja said its becoming harder for fraudsters to succeed because the system of transactions has improved considerably.

    “Cheques knitting cannot fly again because the system has gone 3+3 and 3+2 transactions. Based on this, it would become difficult to manipulate the transaction process and made away with the bank’s money,” he added.

    Also, the Chairman, National Association of Microfinance Banks (NAMBs), Mr Olufemi Babajide, said the association was aware of sharp practices people were committing in the name of the banks. He said cases abound where people forged the signatures of the managing directors, the logos, letter-headed papers among other documents of the banks to get visas.

    “On the issue of people approaching embassies with forged documents of the banks to get visas or conduct any other transactions, we made our positions known on it. What we agreed is that the statements that are being taken to the embassies must bear the original signatures of the managing directors of the banks. The names of the MDs must be handwritten. We have advised the embassies, among other agencies to confirm the identity of any statement brought to them in the name of MFBs,“ he said.

  • MfBs groan under huge tax burden

    Microfinance banks are battling MfBs huge tax burdens and botched attempts to get tax holidays from the government, The Nation has learnt. According to the annual reports of some of the banks, huge taxes is common to all the entities.

    For instance, Lift Above Poverty Organisation (LAPO) Microfinance Bank Limited paid N1.1 billion tax to government in 18 months. Also, Unical Microfinance Bank Limited, Calabar, Cross River, paid N7 million tax per annum to government.

    Many of the operators in Lagos, who spoke under cover, said they have tried to meet the government on the issue, but to no avail. They said MfB operators were mostly affected, due to various taxes imposed on them by the government.

    The Managing Director of LAPO Microfinance Bank Limited, Godwin Ehigiamusoe, said quite a large number of the banks were having problems with taxes. He urged the Federal Government to consider microfinance banks in terms of tax payment so they could reach a good number of the low income earners.

    He said: “Microfinance banks that are supposed to support poor people are subjected to the same tax regime of an oil and gas company. If you look at our financials, we paid a tax of N1.1 billion cash for 18 months to the Federal Government, because of what tax people call tax commencement or tax registration.

    “Our appeal is that because of the peculiar nature of microfinance, and because of the peculiar nature of those who benefit from microfinance banks, they should be given some consideration or rebate in terms of tax. This can translate to a bigger loan to reach a large number of people,” he added.

    Also, the Managing Director/CEO of Unical Microfinance Bank, Edim Obim, advocated that government should grant microfinance banks tax relief to consolidate and provide financial services to those at the grassroots.

    Reacting to the development, Chairman, National Association of Microfinance Banks, South West Lagos (NAMLAG), chapter, Olufemi Babajide, confirmed that microfinance banks have not enjoyed tax holiday from the governments, adding that the sub-sector had approached government but nothing positive came out of it.

    He said: “Microfinance banking is a new business. We should have tax holiday for at least 10 years so that we can establish well and serve the low income earners better. The government of Western Australia recently granted payroll tax rebate to small businesses operating in that country.

    “Such small businesses with nationwide group payrolls of up to $1.5 million in the 2012/13 financial year would receive a full rebate of their WA payroll tax liabilities, with a maximum value of $41,250.

    “The rebate is part of the measures the Western Australian government has put in place to reduce the tax burden on small businesses, which are the backbone of the economy. This will help ensure that the country remains an attractive place to do business.

    “If this is replicated in Nigeria, particularly in the microfinance sub-sector, the same advantage or benefit will be achieved,” he said.