MFBs explore ways to comply with new deadline on re-capitalisation

Following the extension of deadline on compliance of re-capitalisation requirements by the Central Bank of Nigeria (CBN), microfinance banks (MFBs) operating in the country are now exploring ways to meet up with the December 31, 2013, new deadline.

One of such ways is arranging for mergers and acquisition (M&A). Already, some of the stronger MFBs have been approached by the weaker ones in this regard.

Apart from M&A, Olufemi Babajide, chairman, National Association of Microfinance Banks (NAMB), South-South zone, says the association is assisting MFBs in terms of getting investors, local, international and corporate bodies to invest in the sub-sector. Babajide, who spoke with BusinessDay, says the association is also arranging long-term debenture that will run for 10 years for its members.

Responding to the extension of deadline for re-capitalisation requirements by the CBN, he says, “we are feeling good. We have now gone to the drawing board to see how we can meet up with the new deadline. Our members are rallying round to see how they can raise fund to meet up.”

Olufemi Fabamwo, director, other financial institutions department, CBN, in a circular to all directors and shareholders of MFBs on ‘Extension Of The Deadline For Compliance With The Revised Microfinance Policy Regulatory And Supervisory Framework For Nigeria,’ explained that the essence of the extension was to allow more time for capital raising and business combination options towards meeting the capital requirements for each category of MFBs and for rationalising the existing branches/cash centres, among others, where necessary. According to him, all directors and shareholders of MFBs are strongly advised to ensure compliance on or before the new deadline of December 31, 2013.

Part of the circular reads: “… further to the CBN circular Ref: OFI/DIR/GEN/CIR/01/06 of August 11, 2011 and OFI/DIR/GEN/CIR/01/09 of December 17, 2012 titled “Revised Microfinance Policy Regulatory And Supervisory Framework For Nigeria,” this is to convey the decision of the Central Bank of Nigeria to extend the deadline for compliance by microfinance banks (MFBs) with the Revised Microfinance Policy Regulatory And Supervisory Framework For Nigeria from December 31, 2012, to December 31, 2013.”

The CBN’s response was a response to the earlier request of MFBs to extend the re-capitalisation deadline to December 31, 2013.

They believe that extending the date will offer them enough time to either re-capitalise or enter into M&A.

The CBN had in the revised policy framework provides for three categories of MFBs and stipulated minimum capital requirements for each category.

Category one is a Unit Microfinance Bank – authorised to operate in one location and is prohibited from having branches/cash centres, while category two, a State Microfinance Bank – authorised to operate in one state or the Federal Capital Territory (FCT) and is allowed to open branches within the same state or the FCT, subject to prior written approval by the CBN for each new branch.

The third category is a National Microfinance Bank – authorised to operate in more than one state including the FCT and is allowed to open branches in all states of the federation and the FCT, but subject to prior written approval by the CBN.

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HOPE MOSES-ASHIKE