About 600 of over 800 microfinance banks in the country may be closed down soon by the Central Bank of Nigeria unless they merge within the next few months, investigation, by our correspondent has shown. Some CBN and industry sources told our correspondent on Friday that the 600 MFBs could not meet the recapitalisation deadline, which expired on December 31, 2013. The CBN, which several months ago asked the MFBs to recapitalise, had categorised them under different amounts of capital base requirement. The first group, the Unit Trust MFBs, is expected to have a capital base of N20m. Those in this category, according to the CBN, are expected to operate from only their head office. The second category, the state level MFBs, is licensed to operate from only a state of the federation and it is expected to have minimum capital of N100m. The third category of MFBs is licensed to operate at the national level. Those in this group are allowed to operate throughout the federation and are expected to have a capital base of N2bn. Findings by the SUNDAY PUNCH revealed that the CBN had asked the over 600 MFBs which failed to meet the recapitalisation exercise to merge. A CBN source said a number of the affected MFBs were already discussing with one another with a view to combining businesses. It was also gathered that others had voluntarily closed down and that the CBN would clamp down on them any time soon. A source privy to the development said, “Many of the MFBs have voluntarily shut down. Some are looking into the merger and acquisition deals as advised by the CBN. By the time the CBN looks into their 2013 accounts, it will take decisive actions on the MFBs. The CBN dealt with a number of them last year when it looked into their 2012 accounts.” The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, confirmed that the CBN had advised MFBs which failed to meet up with the recapitalisation to merge. She said the management of the CBN was looking at setting up a deadline for the MFBs to merge or get liquidated following which the Nigerian Deposit Insurance Corporation would be asked to refund customers their deposits. Martins said, “Microfinance banks that failed to meet up with the recapitalisation deadline have been advised to merge. The recapitalisation deadline has expired. So they have been asked to merge. Microfinance banks that fail to merge will be liquidated and depositors fund will be paid through the Nigerian Deposit Insurance Corporation. The management of the CBN will come up with a deadline for the merger soon.” Further findings showed that the CBN had appointed some firms to carry out an examination on the MFBs across the country and to check their compliance level. It was learnt that the previous delay in taking actions on the MFBs was due to the fact that the central bank lacked the adequate manpower to examine all the MFBs across the country. The source added that with the appointment of some firms to assist with the exercise, serious actions were imminent on the MFBs that defaulted. The CBN had in 2010 revoked the operational licences of 224 MFBs as a result of what the regulator termed ‘below performance’ measuring yardstick. The CBN had said the microfinance banks were not technically sound, hence the revocation. It noted that the NDIC would immediately step in to ensure all insured depositors were paid their entitlements. However, the CBN later rescinded its decision and granted a provisional approval for new licences to 121 MFBs that had been confirmed to have made fresh capital injection, subject to the fulfilment of some specific requirements within a stipulated timeline of three months. The requirements for issuing new operating licences to the 121 MFBs were the capitalistion of prior deposits for shares; making available the new capital injection to bring the shareholders’ funds, unimpaired by losses, to the prescribed minimum of N20m; good corporate governance; sound risk management system; and strong internal controls to forestall avoidable losses. Other criteria set out were the closure of unapproved branches, cash centres and ‘customers meeting points’; and the adoption of true microfinance business model, among others.
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