By Amaka Agwuegbo
Former Lagos State chairman of the defunct National Association of Microfinance Banks of Nigeria, NAMFBIN, Chief Olutayo Adenekan, has said that the establishment of the Intervention Fund by the State Chapter is to meet the need for short term financial support by microfinance banks, MFBs.
Speaking to Vanguard, Adenekan pointed out that the increasing rate of distress by MFBs and the Central Bank of Nigeriaâ€™s, CBN, insistence of not bailing out any MFB compelled Lagos State chapter to set up a Fund to cater to MFBsâ€™ financial needs.
â€œThe essence of the Fund is to ensure that the needs for short term financial support by MFBs are met. This is because commercial banks have other windows of borrowing in cases of short falls, but there are no such opportunities for MFBs.
â€œThe Fund would make funds available to banks at the shortest possible time so that if a bank is short of funds and customers need to make withdrawals, behind the scene activities would go on between the bank and us which will enable us to transfer funds to the bank without the customers noticing that there is any problem.â€
Adenekan pointed out that it would be contributory and members would have access to the Fund at the shortest notice.
â€œWe intend for the Fund to accommodate non-MFBs because we want other institutions to contribute to the Fund for the profit since we intend for it to be a profit making venture. This will enable contributors have dividends at the end of the year.
â€œWe are equally looking at building into collateral in the sense that each bank would register collateral with us so that when they need cash, we donâ€™t need to start vetting their banks. This implies that if the collateral is worth N4m, at short notice, that bank can take a loan of N4m.
Explaining how a bank can qualify for the Fund, Adenekan said: â€œFor a bank to be part of the Fund, it must be registered by the CBN and be issued final license; must be enrolled with the Fund by depositing in the minimum amount required; must be a member of the association; must have registered a collateral with us, pay its dues regularly and be willing to open its books and doors to us.â€
Stating that the essence of the Fund is to ensure that the bank doesnâ€™t become distressed again, Adenekan said there will be a determined procedure for fund withdrawal once the issues are resolved.
â€œFirst and foremost, we have to consider the nature of the problem the bank had. This is because the Fund is not there to favour a particular board or management but to help solve an issue. The money will be with the bank for whatever period of time it would need to solve its problems.
â€œBut once the problem is solved, there will be a determined procedure for fund withdrawal that would not lead to the problem again. This is basically because the essence of the Fund is to ensure that the bank doesnâ€™t go down.â€