The Non-Performing Loans (NPLs) of Microfinance Banks (MFBs) decreased by 5.27 percent from N26.18 billion in December 2017 to N24.80 billion in December 2018.
Similarly, the NPLs (portfolio-at-risk) ratio improved from 13 percent in 2017 to 11.20 percent in 2018 but still above the regulatory threshold of 5%.
The 2018 annual report of the Nigeria Deposit Insurance Corporation (NDIC) stated that the total assets of MFBs stood at N384.50 billion as at December 31, 2018 against N360.59 billion in December 31, 2017. Likewise total loans and advances stood at N221.51 billion in December 2018 against N201.37 billion in December 2017.
The MFBs’ sub-sector reported a gross income of N105.00 billion as at December 31, 2018 as against N89.63 billion in 2017. Interest income also recorded an increase of 3.06 percent from N78.98 billion in 2017 to N81.40 billion in 2018. Noninterest income slightly improved by 2.25 percent from N23.08 billion as at December, 2017 to N23.60 billion in December 31, 2018.
Profit before tax recorded a marginal increase of 0.06 percent from N16.21 billion in 2017 to N16.22 billion in 2018. But Return on Asset (ROA) and Return on Equity (ROE) decreased from 4.50 percent and 18.90 percent in 2017 to 4.22 percent and 18.19 percent in 2018, respectively.
According to the report, the MFBs’ total deposits increased, by 14.7 percent from N166.88 billion in 2017 to N191.41 billion in 2018. The average liquidity ratio also increased from 72.54 percent in 2017 to 73.95 percent in 2018, and above the minimum regulatory threshold of 20 percent. The MFBs’ loan to deposits ratio stood at 115.73 percent as at 31st December, 2018 against 120.66 percent as at December31st, 2017.
During the year, the CBN granted one year extension to April 2021 for the recapitalization of MFBs. Consequently, two tiers of Unit MFBs were created, namely: Tier 1 (Unit Rural) and Tier 2 (Unit Urban). The capital requirement for Tier 1 Unit Rural MFBs was fixed at N50 million, while Tier 2 Unit Urban MFBs remained at N200 million.
The compliance timeline was reviewed to allow MFBs sufficient time to recapitalize. The Tier 1, Unit-Rural MFBs are expected to raise their capital to N25 million by April 2020 and to N50 million by April 2021. In the same vein, Tier 2 Unit Urban MFBs should meet capital base of N100 million by April 2020 and N200 million by April 2021. The State and National MFBs were given up to April 2021 to meet the new capital requirements.
The Bankers’ Committee, in collaboration with the NIPOST and NIRSAL initiated the establishment of a National Microfinance Bank. The Bankers Committee would own 50 percent of the bank’s equity, while the Nigeria Incentive-Based Risk SharingSystem for Agricultural Lending (NIRSAL) and the Nigerian Postal Service (NIPOST) would own 40 percent and 10 percent, respectively. The NIRSAL MFB would leverage on NIPOST’s presence in 774 local government areas of the country to reach its targeted beneficiaries.
The sub-sector faced some challenges, which include the adoption of inappropriate business models; poor corporate governance practices and insider abuse; poor asset quality and loan underwriting process; weak capital base; dearth of experienced and skilled staff in microfinance; low financial literacy levels particularly in rural areas; and high operating cost.
