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MFBs’ clearing house: To be or not to be?

By Amaka Agwuegbo
Despite the delays encountered in the clearing of cheques through correspondence banks, microfinance banks (MFBs) are divided over the setting up of a separate clearing house for them by the Central Bank of Nigeria (CBN).

Those opposed to the separate clearing house explained that though cheque clearing through corresponding banks was one of the factors that hindered their growth, but setting up a separate clearing house for MFBs would be a difficult venture to undertake.

Meanwhile, those in support pointed out that apart from commercial banks being their competitors, appointing an MFB to clear cheques on their behalf would help reduce the delay encountered by operators in the process.

Commenting on the issue, a CBN official, who declined giving his name, said though the issue of a clearing house for MFBs has come up severally, but it does not make sense setting up a clearing house for MFBs when they do not have branches in other states.

“Despite the branch network of commercial banks, not all of them are in the clearing house. “So, how will a clearing house for MFBs work when most of them have just one branch and are not in all the states? Also, if the CBN provides a venue for them to meet, who takes which instruments for the other?

“Considering the cost implication of setting up a clearing house, it is best for them to continue clearing their cheques with their correspondent banks.”
Supporting the CBN’s stand is Mr. Martins Nwankwo, the Managing Director of Ikorodu Division MFB, who pointed out that MFBs don’t exist as a separate finance entity but are part of the banking sector and each banking unit must be within that sector.
“I would not subscribe to a clearing house for MFBs for the simple reason that we are part of a larger financial institution and not a separate finance entity.

“A clearing house for MFBs is not necessary because we have our correspondent banks and if the one an MFB is using is not doing well, the bank has a choice of changing to another.

“Despite the sizes of banks in advanced countries, not all of them are in the clearing house but they use other banks as their settlement banks. But the fact remains that we still have our correspondent banks, though most of them see us as competitors by setting up their MFBs.” |

Lending his support is the Managing Director, Citigate MFB, Mr. Phillips Okuabor, who said that there are more pressing issues to be dealt with than the setting up of a clearing house for MFBs.

“What would be the benefits of a separate clearing house for MFBs when there are more pressing issues to be tackled? Are the correspondent banks not clearing our cheques?” The correspondent banks have not refused to clear for us because I’ve not encountered any problems with them while clearing my cheques. But I have no objections if the CBN decides to appoint one of us as a clearing house.”

Maintaining that the current arrangement is still okay, the Managing Director of Imperial MFB, Mr. Ejike Azubuike, said the setting up of a clearing house for MFBs would be difficult considering the cost implications.

“For now, the current arrangement is still okay because the issue of a clearing house for MFBs would be a difficult process considering the number of MFBs and the cost implication.

“The only problem I believe we encounter is that we loose value in terms of the extra day the cheques spend at the correspondent banks’. But in the future, a better arrangement could be worked out, but for now, it would be a strenuous process setting up a clearing house for MFBs.”
Leading the call for the establishment of a clearing house for MFBs is the Chairman of Enugu-based Umuchinemere Pro-Credit Microfinance Bank (UPMFB), Rev Prof. Obiora Ike, who said the policy whereby MFBs are not allowed to be in the clearing house of conventional banks militates against the operations of MFBs in rendering service to their customers.

“It has become a matter of urgency that a special clearing house be established for MFBs for us to have easy operations and better service as the CBN has stepped up efforts to reform and reposition the country’s banking industry for the better.

“One of the reasons we want a clearing house is because the daily business transactions of some MFBs are increasing in volume, making it difficult to meet the pressing needs of MFBs’ increasing customers and present day situation.”

For the Managing Director, Aguda Tinun MFB, Mr. J. Akapo, the establishment of a clearing house for MFBs has become necessary to avoid the continued preying of their big customers by the correspondent banks.

“Our correspondent banks pick the cheques of our big customers with the intention of marketing them for themselves. But if MFBs have their own clearing house, such situations would not arise.

“Also, the correspondent banks don’t want to collect third party cheques anymore just because they claim not to be sure of their authenticity, but these are the cheques of our customers.

Also in support of the clearing house for MFBs is the Interim chairman of Lagos State Chapter, National Association of Microfinance Banks, Chief Olutayo Adenekan, who said cheque clearing through corresponding banks is unfair and is one major factor that hindered the development of community banks in the country.

“There is need for government to intervene on the issue of cheque clearance for MFBs because asking us to clear our cheques through correspondent banks is unfair and it is one of the factors that militate against community banks development in the country.”

Adenekan explained that commercial banks are, to some extent, competitors of MFBs, making it inappropriate for them to be the institution to clear the cheques of MFBs.


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