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Microfinance Banks: New era beckons as apex body takes off

Amaka Agwuegbo

The microfinance banking system took off with sharp division among members which led to the emergence of two associations namely National Association of Microfinance Banks of Nigeria (NAMFBIN) and Association of Microfinance Bank in Nigeria (AMBN). The former represents former community banks that converted to microfinance banks while the later represents newly licensed microfinance banks.

But the Central Bank of Nigeria (CBN) realizing the need for an apex body for the over 1000 microfinance banks directed the two bodies to merge and actually supervised the  signing  of memorandum of understanding between the two bodies to  merge.

The harmonization of the two bodies is expected to usher in a new beginning for the subsector as the new body promote and protect the interest of the banks and their customers as well as ensure members play by the rules, writes Amaka Agwuegbo.

Microfinance banks at inception were by default divided into two distinct categories. There were the newly licensed microfinance banks, green with fresh capital, young and dynamic upward mobile management staff who operates from offices which rivals that of the universal banks in terms of ambience and information technology infrastructure, and rides in latest cars and wears designer suits. On the other side were the former community banks that converted to microfinance banks  which bore the marks of institutions struggling to survive.

Thus it was natural that it would be difficult for the two categories of microfinance banks to interact and cooperate under a single body.

Prior the introduction of microfinance banks, the community banks had an umbrella body known as National Association of Community Banks (NACOBs). This they carried forward into the microfinance banking system as National Association of Microfinance Banks of Nigeria (NAMFBIN). Ordinarily the newly licensed microfinance banks should have joined this association.

But in  apparent contempt and disdain for the community banks turned microfinance banks, they formed their own association known as Association of Microfinance Banks of Nigeria (AFBN). The result was sharp division and disharmony in the subsector.
“It was chaotic and there was a lot of misinformation because there were two groups in the sector. We had a situation whereby one group will take annual subversion and the other would do same,” said Mr. Ikechukwu Awa, Managing Director of Good Neighbours MFB,

The division also became a challenge to the CBN as it has to cope with the difficulties of dealing with two competing groups. Apparently tired of the situation and realizing that having an apex body with self regulatory status is critical to addressing the myriads of problem confronting the sector, the CBN directed the merging of the two associations into a National Association of Microfinance Banks (NAMB), which would be the only authorized and official body to represent Nigerian MFBs.

To this effect the two groups met two weeks ago under the supervision of the CBN and the Nigeria Deposit Insurance Corporation (NDIC) and signed a memorandum of understanding to merge.

Speaking at the  signing ceremony , which was preceded by an Extra_ordinary General Meeting of each association, Director, Other Financial Institutions Department (OFID) of the CBN, Mr. Femi Fabamwo, urged MFB operators to ensure that members are always carried along so as to curtail the loss of confidence crisis that is presently bedeviling the sector.

Represented by Deputy Director and Head, Microfinance Unit, CBN, Mrs. Folake Ogunnaike, Fabamwo pointed out that the dissolution of the two associations was necessary as their activities have become polarized.

“There is the need for an apex association for MFBs in Nigeria, and we are grateful for the peaceful and grand atmosphere which had pervaded this event.

“To this effect, a 5 man committee has been set up by the CBN till the association’s January 29, 2010 general elections. This is to enable the CBN effectively monitor the activities of MFBs since the apex bank’s supervision is crucial to the success of the operations of MFBs.”

The committee is  chaired by Mr. Matthias Omeh, has Otunba Olatunde Olowu, Mallam Ibrahim Sidi Bamalli, Mrs. Olubunmi Lawson and Mr. Jude Nosagie as members.|

Pointing out that microfinance is essential to the growth of the Nigerian economy because it brings banking culture to the grass root, the former national president of the defunct National Association of Microfinance Banks of Nigeria, Otunba Olatunde Olowu, said the harmonization became necessary because a group fed the CBN junk information about the other group.

“Because the CBN was fed junk by AMBN about NAMFBIN, this led to a lot of misconceptions and the CBN saw NAMFBIN as a threat, thereby, cutting off dealings with us. But I thank God the CBN has waded in by harmonizing the two factions.

Olowu urged members to put the past behind and look forward to a rewarding future since they can’t afford to send wrong and conflicting messages to members and the public.The MoU signed by the two associations reads in part:

“That the National Association of Microfinance Banks, NAMB, shall be the only registered and official association of all microfinance operators in Nigeria with powers to deal with the Central Bank of Nigeria and the Corporate Affairs Commission (CAC).

“That all assets of the two associations shall from the date of this agreement now become that of NAMB.
“That all licensed MFBs in Nigeria shall, with effect from the date of this deed of agreement, become members of this association upon registration in accordance with the provisions of the constitution of NAMB.

“That with effect from the date of this deed of agreement, all liabilities of the former two associations shall not be binding on the new association except as approved by the national executive council of NAMB.

“That by the formation of NAMB, all members of the former associations shall by virtue of this deed of agreement, become registered members of NAMB in so far as they have proof of membership of any of the two defunct associations.

“That all registered MFBs in Nigeria have by the execution of this deed by the principal officers of the two former associations agreed to the enactment of a new constitution which shall be the supreme authority of the microfinance association known as NAMB.

“That, by the execution of the deed, it shall be caused to be conducted an election of new officers to be responsible for the management of NAMB.

“That, after the execution of this deed by the appointed officers with the satisfaction of the Central Bank of Nigeria, it shall be an offence for any person or group of persons to form another association of microfinance bank operators.”

Before the merging of the two associations, the situation in the sector was that of confusion, misconception, misinformation, lack of communication, disparity, and the likes.

On what members stand to benefit from the harmonization, Olowu said that since there will only be one association representing MFBs in Nigeria, the assets and liabilities of both associations will now be combined as enshrined in the Memorandum of Understanding (MoU).

“Just like the Bankers’ Committee for commercial banks represents them, the National Association of Microfinance Banks (NAMB) would be the official and authorized body for the MFB sector, and we will deal more with the regulatory bodies since we are fighting for the same cause.

“Also, since there is one association which would be better structured, the MFBs would be better monitored and self-discipline would be better imposed on members.”

For the Managing Director of Imperial MFB, Mr. Ejike Azubuike, “Since the members are fighting for the same causes, it is in our interest to have a formidable association that will speak for us. This is because the CBN hardly deals with us because of the different associations.”Awa further notes, “The association would be more focused and single_minded since there can’t be two captains in the same boat. The association would talk with one voice and be able to put up a good front.

“There would be more trust among the members since there won’t be any form of disparity in the association since we are fighting for the same cause.


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