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Need to mentor MFBs on sound risk management principles

HASAL Microfinance Bank

To reduce the high credit risk in micro-finance banks (MFBs), the Central Bank of Nigeria (CBN) in conjunction with the Financial Institutions Training Centre (FITC) engaged MFBs on enterprise risk management (ERM).

The aim of this engagement was to mentor them on the imperatives of adopting sound risk management principles.

In view of the poor asset quality of most of these MFBs, there are still more room for such mentoring. According to the CBN, poor asset quality remained the bane of the MFBs last year.

The Financial Stability Report of the CBN showed that at end-June 2013, there were 903 licensed MFBs, representing an increase of 21 over the number at end-December 2012. Routine examination was conducted by the regulator on 262 of the MFBs and the outcome was mixed. Several MFBs recorded improvements in performance, while some others witnessed deterioration in operational results.

Spot checks were also conducted to confirm the status of 123 other MFBs that had earlier been observed to be inactive, the report stated.

However, access to finance through the MFBs improved during the review period. Total assets of the MFBs increased by 25.2 percent to N278.9 billion at end-June 2013, from N222.8 billion at end-December 2012.

The paid-up share capital and loans/advances also increased by 14 and 46.1 percent to N69.2 billion and N141.7 billion, respectively, at end-June 2013. Similarly, aggregate reserves increased to N5.8 billion at end-June 2013, from a negative N7.4 billion at end-December, 2012, reflecting a significant turnaround in their operational performance.