How Parallex transitioned from microfinance to commercial bank – MD
..As total assets of microfinance banks hit N1.4 trillion
Parallex Bank Limited has bagged an award from the National Association of Microfinance Banks (NAMB) for its historic feat of becoming the first microfinance bank to transition into a commercial bank amid the challenges in the sub-sector.
The award ceremony was held in Abuja at the 12th Annual General Meeting of NAMB.
After over a decade of operating as a microfinance bank, Parallex, was granted a Commercial Banking Regional operating license in January 2021, and subsequently began operations in July 2021, with a market launch in January 2022.
Femi Bakre, managing director Parallex Bank Limited, who received the award on behalf of the bank said that although the journey was quite challenging, the bank successfully navigated through those tough times, leveraging its solid structure anchored on three major principles.
“From day one, we put three pillars together, more like guiding principles; the first one is corporate governance, the second is due process and the third is professionalism,” Bakre told BusinessDay.
“If you have these three pillars, certainly, the structure that is coming out of it will be nothing but phenomenal and we started on that note. So, migrating to a commercial bank was quite challenging, but seamless because we already created that platform, a structure that can take or sustain us,” he explained.
According to him, some of the challenges the bank overcame bordered on documentation, regulatory requirements, among others. He added that the bank also leveraged on technology in its banking process to attain the feat.
While noting that technology as the future of banking, the managing director explained that the bank prioritized digital banking as it migrated into a commercial bank.
“Being given this award, we see it as privilege, a great honour and something that is exceptionally unique and we cannot do less than continue to champion a course where we remain a good inspiration for other microfinance banks to come up,” he added.
Parallex Bank Limited was incorporated first as Parallex Microfinance Bank in May 2008, as a limited liability company with paid-up share capital of N2.76 billion. Thereafter, the Bank obtained a license from the Central Bank of Nigeria to operate, and commenced operations as a Unit Microfinance Bank in January 2009.
After fifteen months of operations, the bank upgraded its status from a Unit microfinance bank to a state microfinance bank in March 2012. It obtained a license from the Central Bank of Nigeria to operate as a National microfinance bank in October 2013, and after 20 Months of operations as a state microfinance bank, thus becoming one of 10 microfinance banks licensed from almost one thousand existing players.
After 10 years of operations, Parallex microfinance bank applied to the Central Bank of Nigeria for a Commercial Banking license and in November 2019, and received an Approval In Principle (AIP) for conversion from a Microfinance Bank to a Commercial Bank.
After putting together all the necessary structure and infrastructure, Parallex Bank was granted a Commercial Banking Regional operating license as Parallex Bank Limited in January 2021.
In his valedictory speech , Yusuf Gyallesu, national president of the association said that the last two years have been exceptionally difficult for the microfinance sector because of the very harsh operating and uncertain regulatory environment.
The president said the myriad of challenges was heightened by the COVID-19 pandemic, insecurity and recurring economic recessions which impacted negatively on the activities of the sub-sector.
He revealed that the level of anxiety in the sector was further complicated by the April 30, 2022 deadline by the CBN for all the microfinance banks to raise their minimum share capital by 100 percent.
According to him, if the directive is fully implemented, it will result in the collapse of a large number of microfinance banks. The president therefore appealed to the regulators to passionately reconsider extending the recapitalization deadline to December 2025 and also cut the required additional capital by at least 50 percent in view of the realities on ground.
Meanwhile, in its annual report, NAMB revealed that as at June 30th, the total assets of microfinance banks was N1.409 trillion, a rise from N1.35 trillion recorded in September 2021, while gross loans and advances settled at N1.024 trillion.
The report also indicated that the industry has a total of 875 microfinance banks; out of which 9 are national microfinance banks, 98 are state microfinance banks, while 768 operate unit microfinance banks.