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Corporate governance : Operator advocates broad-based boards for MFB

By Amaka Agwuegbo

Managing Director of Lagos-based Imperial Microfinance Bank, Mr. Ejike Azubuike, has called for broad based-boards of directors as panacea to the problem of poor corporate governance in microfinance banks, MFB.

It would be recalled that the Central Bank of Nigeria (CBN) in its 2008 annual report said that most microfinance banks have poor corporate governance and poor asset quality.
In an interview with Vanguard, Azubuike said that corporate governance of MFBs can be improved on if such banks have broad-based boards with low level of insider related credits.

He said “Corporate governance in microfinance banks can be improved on by the CBN ensuring that the board of every microfinance bank is broad-based.

“This is can be achieved by  insisting on a minimum of 5-7 board members and by eliminating a situation where family members dominate boards of microfinance banks. Once the board is broad-based, that is a solid step towards ensuring good corporate governance.”

It would be recalled that at the last Committee of the Microfinance Banks in Nigeria (COMBIN), which was held last month, the CBN cautioned operators of microfinance banks against exposing themselves to high level of insider-related credits which are always beyond the stipulated limits by the law establishing MFBs.

Section 20(2)(a) of BOFIA, 1991 stipulates that a bank shall not, without prior approval in writing of the CBN, permit to be outstanding, unsecured advances, loans or unsecured credit facilities of an aggregate amount in excess of N50,000 to any of its directors, to any firm, partner-ship or private company that any of its directors is a guarantor or any public or private company in which any of its directors maintains a shareholding of not less than 5%, either directly or indirectly.

Secured loans, advances and other credit facilities, which are secured by acceptable collaterals shall not exceed 1% of the share-holders’ fund for any individual borrower and 5% for group borrowers.
Aggregate insider-related lending shall not exceed 5% of paid up capital of any MFB at any time. This includes both secured and unsecured lending, but excludes staff loans and advances. But it is expected that the share-holders’ fund would be higher than the paid-up capital.

This Azubuike agrees with as he said that another area of ensuring good corporate governance is by reducing or eliminating insider related credits, which the CBN is harping on.
“Directors and CEOs, on the aggregate, are not supposed to take loans over and above 5 per cent of the paid up share capital.”

Speaking on the activities of fake microfinance banks and its effects on the sector, the Imperial MFB boss said those that have been identified as fake have been closed down with the officials handed over to the Economic and Financial Crimes Commission, EFCC.

“Also, the management and staff of genuine and registered MFBs have been urged to co-operate with the CBN by alerting the CBN of any unregistered MFB operating in our locality.
“And in facilitating in assisting the CBN identify such fake MFBs, it was agreed that the CBN would roll out a comprehensive list of all registered MFBs. With these steps put in place, I believe that fake microfinance banks would be phased out.”


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