CBN asks banks to stop rendition of returns on micro credit fund

The Central Bank of Nigeria (CBN) on Wednesday stopped deposit money banks (DMB) from rendering returns on Micro Credit Fund (MCF) to it. This is against the backdrop of some banks that still render returns on MCF to the CBN more than five years after the discontinuation of the scheme.

The MCF, which had been in operation since February 8, 2008 was discontinued through the decision reached at the 298th Bankers’ Committee meeting of March 15, 2010.

Tokunbo Martins, direc- tor of banking supervision, CBN, said in a circular that the decision was borne out of the fact that after two years of its existence, deposit money banks were not forthcoming in their contributions to the fund and in the same vein only few states responded to the programme.

Part of the letter to all banks on ‘Cessation of Rendition of Returns on Micro Credit Fund,’ reads: “We, however, observed that some banks still render returns on MCF to the Central Bank of Nigeria more than five years after the discontinuation of the scheme. Banks are hereby directed to stop forthwith the rendition of this return to the CBN”.

The CBN had in guidelines for the operations of the Micro Credit Fund stated that to further enhance the flow of funds, particularly to micro enterprises, the Bankers’ Committee would set up a Micro Credit Fund (MCF) of N20.0 billion. This was projected to grow to N100.0 billion by 2010.

In addition to this, banks were expected to continue their support to SMEs, while the CBN, in collaboration with the fiscal authorities would work out other necessary incentives to make SME lending more attractive to banks.

One of the objectives of the Micro Credit Fund was to complement the poverty and small and micro credit interventions by government at all levels as well as the activities of the microfinance banks in supplying a large but cheap source of finance to the small and micro entrepreneurs.