By Amaka Agwuegbo
An expert in the microfinance banking sector has commended the Lagos State Chapter of the National Association of Microfinance Banks of Nigeria for setting up an intervention fund as a bailout for distressed microfinance banks, MFBs.
In an exclusive interview with Vanguard, a retired Director, Special Insured Institutions Department of the Nigeria Deposit Insurance Corporation, NDIC, Mr. Jeol Ahimie, said the gesture by the Lagos State Chapter of the National Association of Microfinance Banks of Nigeria will go a long way in mitigating some of the liquidity problems that the MFBs are having, since majority of loans that have been given out by the banks are bad.
â€œThe Intervention Fund that is being set up by the association is a step in the right direction. This shows that the association is concerned about the situation in the sub-sector and is actually willing to help the Central Bank of Nigeria, CBN, by cushioning the effects of the illiquidity problems of these MFBs.â€ Ahimie said.
He noted that a lot of MFBs are exposed to liquidity crisis due to the high rate of default in loan customers have taken from the MFBs.Pointing out that since the CBN and NDIC alone canâ€™t monitor the activities of the MFB operators, Ahimie urged the CBN to properly reorganize the MFB association into regions so that it would be able to monitor and report to the CBN those who are setting up offices, thereby enabling the association check the excesses and illegalities of MFBsâ€™ operators.
The Fund, which was set up by the Lagos State Chapter of the National Association of Microfinance Banks of Nigeria, would be used in addressing the problems of short term liquidity that is becoming a common feature in the microfinance sector.
The Chairman of the chapter, Mr. Adenekan, said the aim of the contributory Fund is to fortify the cash base of the banks, thereby forestalling the occurrence of the crisis in the commercial banking sub-sector in microfinance sub-sector.
Continuing, he said â€œIf there is any sign of liquidity problems in any member-MFB, a Technical Committee, which has been set up and saddled with the responsibility of closely working with our members, would look into the matter and determine how much would be given to the distressed bank as bailout.â€