Microfinance Banks ( MFBS) operating in Nigeria are asking the Central Bank of Nigeria (CBN) to provide a N50 billion intervention fund to be disbursed to small businesses, tailored specifically as working capital loans.
Rogers Nwoke, president, National Association of Microfinance Banks (NAMB), explained that the tenure would be for three years at affordable interest rates.
To ensure adequate outreach across the country, the association proposed a breakdown of allocation of the fund as follows: Tier-2 Unit MFBS – N50 million each, Tier-1 Unit MFBS – N250 million each, State MFBS – N500 million each and National MFBS
– N1 billion each.
The CBN had in March 16, 2020, established a N50 billion credit facility through NIRSAL Microfinance Bank Limited, for households and Small and Medium Enterprises (SMES) that have been particularly hard hit by coronavirus.
The board of trustees of the NAMB drew the attention of the CBN to the fact that micro entrepreneurs and small businesses would be most affected in the possible economic lockdown that Coronavirus may create, given that the active poor and most vulnerable persons in the economy are found in this subsector.
The NAMB also called on the CBN to consider an amendment in the provisions for classified risk assets and possibly align it with the commercial banks provision requirements for Small and Medium Enterprises (SME) short- and long-term loans.
This measure becomes most auspicious at this time as MSMES would have highest loan defaults at difficult economic situations.
To avoid a total collapse and complete erosion of capital from potential loan defaults, the board of trustee said adjusting the prudential guidelines in the form as recommended would preserve the over N275 billion risk assets of the microfinance sub-sector.
At a time when the microfinance banks are preparing and struggling to meet new capital thresholds, any activity that further erodes the existing capital will frustrate the efforts of the CBN and the banks to strengthen the capital adequacy ratios of the sub-sector.
Furthermore, NAMB appealed to the CBN to grant an extension of time till the year 2023 for MFBS 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,” said Nwoke.
In a statement signed by Ibrahim Bamalli, chairman, and Dan Ogun, secretary, NAMB said the near total lockdown of various economies and its impact on several fund-raising activities of the microfinance has negatively affected the ability of the operators to meet the new minimum capital requirements.
