By Amaka Agwuegbo
The former national president of the defunct National Association of Microfinance Banks of Nigeria (NAMFBIN), Olatunde Olowu, has blamed the Central Bank of Nigeria, CBN, for the low rendition of returns by microfinance banks (MFBs).
Olowu, who was reacting to the recent pronouncement by Dr. Jacob Afolabi, Deputy Director, Research, Nigeria Deposit Insurance Corporation, NDIC, that 50
per cent of MFBs exist on paper, pointed out that had the CBN not reneged on their part of the agreement, the situation would have been better off.
â€œWith great respect to the regulators, I donâ€™t want to cast aspersions but Iâ€™ll say that it depends on the examination machinery that was deployed.
â€œIt is not in the interest of Nigeria that 50 per cent of MFBs should exist on paper because we should be able to do better than that. Initially, the CBN made it mandatory that before any MFB would be licensed, NAMFBIN would first approve.
â€œBut due to the misunderstandings, they started issuing licenses without involving us, so we canâ€™t be held responsible for that because, if they followed what we agreed on before, this situation would have been avoided.â€
Tracing the history of MFBs to the days of community banks, Olowu noted that they have been in the business for the past 16 years when they started out as community banks with capital base of N250,000.
â€œPreviously, the Federal Government mandated commercial banks to establish rural branches which didnâ€™t work. Later, Peoplesâ€™ Bank was established which also failed. In 2005, Obasanjo laid the foundation for MFBs with capital base of N20m and N1bn for unit and state MFBs.â€
Olowu blamed the low rendition of returns on lack of understanding on the part of the operation, especially those in the rural areas.
â€œMost of our members donâ€™t understand some things and are scared to ask officials of the CBN. Most times, they donâ€™t know what to do and it is only what you put on paper that the CBN will see. We found out that most of them have all the documents but donâ€™t know how to go about it so we help them collate the documents.
â€œThe CBN has seen the uniqueness and importance of our job as an association and are compelled to encourage us. But we will try and sort it out since we want to ensure that the integrity and good name that we have established is not destroyedâ€, Olowu stated.
It would be recalled that Vanguard reported that Afolabi, Deputy Director, Research, NDIC, at a workshop organized for finance correspondents by NDIC in Kaduna, notedÂ that less than 50 per cent of MFBs currently render returns to the CBN and NDIC as required by the laws guiding their operations.
Afolabi noted that regulating the MFBs has been a major challenge to the NDIC and CBN, as letters sent to most of them seeking to know their present status were either ignored or Â returned undelivered, indicating that they are no longer in operation.
â€œWe have a problem in the MFB sector which is making it difficult to regulate them.Â From our records, less than 50 per cent of MFB operators are complying with statutory regulations, such as filing of returns and giving reports of their activities on a timely basis. Letters sent to these MFBs to determine their status were always sent back, meaning that they have stopped operating.â€
He disclosed that the NDIC has commenced the regularisation exercise for MFBs with the aim of identifying their true status and addressing the numerous irregularities in the system, thereby, protecting depositors from losing their money.