Microfinance banks (MFBs) operating in Nigeria are losing about N42 billion uncollected loans as a result of the Covid-19 lockdown.
Nigeria’s government has locked down its economy for five weeks as part of measures to combat the spread of coronavirus. 913 MFBs across Nigeria serve the low-income earners in society.
Rogers Nwoke, president, National Association of Microfinance Banks (NAMB), estimated N42 billion loan loss for MFBs in response to BusinessDay’s inquiries.
“In a lockdown, as we have now, we are not able to see our customers. So, we have matured loans that we are unable to collect giving rise to delinquency. Also, there is a threat to income as revenues thin out against existing very high costs. Clearly, there will be capital erosion due to losses occasioned by a very high portfolio at risk,” Nwoke said.
Read Also: DBN advocate sustainability banking for Mfbs
The board of trustees of the NAMB last month drew the attention of the regulator to the fact that micro-entrepreneurs and small businesses would be most affected in the economic lockdown given that the active poor and most vulnerable persons in the economy were found in this sub-sector.
However, in consideration of the impact of Covid-19 on the economy the Central Bank of Nigeria (CBN) on Wednesday extended the deadline for compliance with the capital requirements for the MFBs by one year.
The CBN stated this in a circular to all MFBs dated April 29, 2020, and signed by Kevin Amugo, director, financial policy and regulation department.
Consequently, MFBs operating in rural, unbanked and underbanked areas (tier 2) are expected to meet the N35 million capital threshold by April 2021 and N200 million by 2022.
MFBs operating in urban and high density banked areas (tier 1) are expected to meet the N100 million capital threshold by April 2021 and N200 million by April 2022.
State MFBs are to increase their capital by N500 million by April 2021 and N1 billion by April 2022, while national MFBs are expected to meet minimum capital of N3.5 billion by April 2021 and N5 billion by N2022.
MFBs through its Association had last month appealed to the CBN to grant an extension of time till the year 2023 for them to meet the new capital requirements.
“This indeed will be a strong palliative measure towards the survival and sustainability of the microfinance sub-sector. We believe that this will be a more sustainable operational and risk management business model,” Nwoke said.
Godwin Ehigiamusoe, managing director/CEO, LAPO Microfinance Bank Limited, said the development would impact both loan assets quality leading to huge provisioning and revenue decline, saying over time a substantial part of the loans would eventually be collected.
