The Nation Newspaper

Tag: recapitalise

  • 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.