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CBN to revoke licenses of distressed microfinance banks


By Amaka Agwuegbo
The Central Bank of Nigeria, CBN, is to revoke the operating licenses of illiquid microfinance banks,  MFBs, Vanguard investigations reveal.

This, it was gathered, was part of the issues discussed at the recently held Committee of Microfinance Banks in Nigeria (COMBIN) meeting where the CBN told the affected institutions to brace up for the challenges ahead.

Investigation shows that a letter in respect of this directive has been sent by the apex bank to the affected institutions.
The CBN in the letter mandated these MFBs to temporarily stop receiving deposits or giving out loans until they either recapitalise or merge with a stronger bank to form a strong MFB.

Our source revealed that the apex body would have published the lists of the affected institutions in the national dailies, if not for the crisis in the sub sector.

Also, the CBN is planning to release the list of the concerned banks to the public early next year, while the banks have been given till January 2010 to either merge or recapitalise or risk closure.

Further findings show that the affected institutions, mostly converted community banks, would be handed over to the Nigerian Deposits Insurance Corporation (NDIC) by the CBN, while the NDIC is expected to settle depositors of the affected banks of the insured deposits.

Vanguard’s investigations reveal that this reform process is causing  uneasiness in the MFB sector as the affected banks have embarked on aggressive loan recovery to make their banks liquid.

Though efforts by Vanguard to get the list of the affected institutions proved   abortive, most of the affected banks are those currently facing liquidity problems while some have collapsed.

Confirming this, a CBN  source said , “The list of the affected banks has been compiled and would be released soon. We have forwarded letters to the affected institutions, mandating them to stop collecting deposits or giving out loans.”

The apex bank however advised these institutions to either merge with other weak ones to have a strong MFB or merge with strong ones.

As at now, there are 930 microfinance banks operating in the microfinance market while Lagos State has about 205 operators.

The source said  that the latest move is part of the CBN’s effort to sanitise the MFB sector so that mushroom MFBs would give way for stronger ones who are capable of truly extending financial services to the active poor, thus, creating job opportunities and contributing to the National Gross Domestic Product (GDP).

But, the chief executive of  a microfinance bank, who pleaded for anonymity said, “The CBN will not shut down banks, but will not assist any illiquid bank. The CBN is suggesting that weak MFBs either have to shore up their capital base or merge with other weak banks to form stronger banks.

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