• Saturday, July 13, 2024
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BusinessDay

As CBN gives room for MFBs mergers and acquisition

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There is an expectation of stronger microfinance banks (MFBs) in the country if the micro institutions that could not meet with their recapitalisation requirements, successfully engage and conclude with mergers and acquisition as they are directed by the Central Bank of Nigeria (CBN).

The CBN at the Bankers’ Committee meeting held recently in Lagos stated clearly that the deadline for MFBs recapitalisation expired December 31, 2013, and that it had directed those that did not meet up with the requirement of the exercise to merge.

“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,” Tokunbo Martins, director, banking supervision, CBN, said while briefing journalists after the meeting.

However, Idowu Oshokoya, managing director/CEO, Echo Microfinance Bank Limited, sees stronger banks in 2014, given the current moves by the MFBs, which cannot meet the minimum capital base for state licence, combining via mergers and acquisition to be able to retain their current branch networks.

A few banks may be exited, especially the ones that could not meet up with the new capital requirements because they are terminally insolvent and are unattractive/unsuitable for the anticipated mergers and acquisition.

According to him, the withdrawal of licence of the few MFBs that could not meet up with the new capital requirements would not affect the sub-sector significantly. There may be some few attempts to withdraw fund from the industry, but this would not last because of the stronger existing MFBs. These withdrawals would be effectively met by these banks, and confidence would be restored almost immediately.

There may be some traces of further regulation, going by the recent insinuations and policy utterances of the regulatory authorities. This may be similar to what is being experienced in the commercial banking industry today.

He said more banks would be able to return profit, or at least attain break-even points, given the better understanding of their businesses, and increasing efficiency introduced in these businesses. “To date, over 2000 qualified microfinance practitioners (MCIBs) are in the sub-sector, following their successful training and professional qualifications, as sponsored by CBN. Even among the unqualified ones, there are over 5,000 trained microfinance practitioners. This training and qualification is ongoing,” he said.

Better and stronger banks with improving regulation would attract direct foreign investments into the sub-sector, and therefore the injection of the needed funding for expansion, Oshokoya said further, saying “the year would see more and better risk management in the banks, given the increasing knowledge in this area, and leading the banks to institute mitigations against real and perceived risks in their business and environments. This would make the banks more sustainable.”

HOPE MOSES-ASHIKE