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MFBs’ illiquidity blamed on crisis in universal banks

By Amaka Agwuegbo
Operators of microinance banks (MFBs) have blamed the liquidity crisis in the sub-sector on the problems of non performing loans in the commercial banks.

In the recent past, there has been an increase in the number of distressed and unlicensed MFBs, trapping customers’ deposits worth millions of naira with their closure.

The Managing Director of Meridian MFB, Mr. Innocent Ezama, argued that the loan crisis in the commercial banks has a direct bearing on the liquidity crisis in the MFB sub-sector.

“I don’t know why people say both are not related. We are both players in the banking sector and the banking habits of Nigerians are the same, so what affects the big banks will also affect the MFBs, though in a smaller magnitude,” Ezama said.
Collaborating, the Managing Director, Imperial MFB, Mr. Ejike Azubuike, said since commercial banks are not lending, MFBs have to source for funds for on-lending.

“The commercial banks are not lending and this is affecting MFBs’ activities because we get our on-lending funds from the commercial banks. So, if they are no longer supporting MFBs, it would cause more liquidity problems in the sub-sector. Sometimes, we may have cash need problems and may need some current line facilities to enable us cover our shortfalls for the period. But if this is not forthcoming because the commercial banks have stopped lending, then the immediate impact would be felt in the MFB sub-sector.”

However, the Nigeria Deposit Insurance Corporation has debunked claims that the liquidity crisis in the MFB sub-sector is as a result of the loan crisis in the commercial banks.

An official of the Special Insured Institutions Department (SIID), who pleaded anonymity, said such claims are unfounded as the commercial banks are not illiquid, pointing out that a majority of the loans that have been given out by MFBs are bad because of the high rate of default being witnessed in the sub-sector.

According to our source, “The commercial banks don’t have liquidity problems. Any MFB that is claiming to have cash problems because of its correspondence affiliation to the affected commercial banks is lying.

“MFBs ought not to rely on loanable funds for on-lending, but on savings and other kinds of deposits. The commercial banks are fully funded as customers can still make withdrawals from them. So, the liquidity problems of microfinance banks have no bearing on the loan problems of the commercial banks.”


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