By Amaka Agwuegbo
Despite the fact that microfinance banks are empowered by the Microfinance Policy Framework to take term deposits from customers, speculations are rife that the Central Bank of Nigeria, CBN, may stop microfinance banks (MFBs) from receiving term deposits.

CBN building

Feelers reaching Vanguard point towards the possibility that an embargo on term deposits will be among the new policy thrust under consideration by the CBN in its new Microfinance Policy Framework due for release this June.

According to the Microfinance Policy Framework, the various sources of funds available to MFBs are: shareholders’ funds – paid-up share capital and reserves; deposits/savings of customers; debenture/qualifying medium to long term loans; grants/donations from individuals, organizations, national government, and international sources; fees and commissions; and interest income.

When Vanguard sought the views of a cross section of MFB operators on the issue, most expressed displeasure, stressing that stopping them from taking term deposits will sound the death knell for the sector since it is their major source of funds.
According to the National President, National Association of Microfinance Banks (NAMB), Chief Mathias Omeh, refraining MFBs from receiving term deposits would deny a number of people access to the only source of financial service available to them.

“If the CBN decides to stop MFBs from taking term deposits from customers, what happens to people in communities where the only financial service providers are microfinance banks? Assuming a group of individuals or an association wants a fixed deposit for 9 months, should MFBs refuse them, being the only financial service providers? This will not help in growing the nation from the grass-root in any way.”

For Mr. Jide Tade, Managing Director, Halmond MFB, the apex bank should provide an alternative source of funding for MFBs if it wants to stop them from taking term deposits.
“I doubt if it is possible for the CBN to stop us from taking deposits because we are licensed to take deposits and stopping us would mean cutting off access to one of our sources of deposits. Would the CBN provide an alternative source since stopping us would kill the banks as the money from saving deposits can’t sustain us.
“Also, some customers prefer to put term deposits with MFBs than commercial banks as we offer more interest rates than the commercial banks since, most times, the commercial banks don’t need the money, but MFBs trade with such deposits.”

Pointing out that the CBN governor is intent on destroying the economy, the chairman of Solace MFB, Pastor Glory Abrefera, said stopping MFBs from taking term deposits would kill the sector and economy.

“The CBN Governor is evil and thoughtless and I know that the devil sent him to kill the Nigerian economy but I’m going to fight him. If we are stopped from taking term deposits from customers, what are we to trade with and survive on since that is our major lifeline?

“Since last week’s proclamation that people can’t trade with their share certificates, we have been losing N140 million daily, which is not a good thing to happen to this nation.

Mr. Ikechukwu Awa, Managing Director of Good Neighbours MFB, urged his counterparts not to encourage the apex bank to stop MFBs from taking term deposits because such will be needed to run the banks. According to Mr. Phillip Okuabor, Managing Director of Citigate MFB, MFBs can be given a limit instead of outrightly stopping us from taking term deposits.

“The CBN would be tackling us more if it stops us from taking term deposits and this is not right for the survival of the sector and economy as this will limit our financial capabilities.

“Instead of stopping us, we could be given a limit on the amount we accept because I believe people should be allowed to decide whether to deposit their money with either a commercial bank or microfinance bank.

“Already, we have been stopped from taking funds from federal, state and local governments, now they want to cut off one of our major source of funds. How are we to survive?”

But when Vanguard contacted a CBN official, who spoke on condition of anonymity, he debunked such claims, saying the CBN has no intention of stopping MFBs from taking term deposits.

According to the source, “Though the CBN has no intention of stopping MFBs from taking term deposits, this is Nigeria and anything can happen.

“Stopping MFBs from taking term deposits is not healthy for the banks and the economy because it is one of their life lines. This is because savings deposits are so volatile that a customer can deposit money today and come to withdraw the same money tomorrow.

“Term deposit is the major way they make money because it is the only account whereby customers deposit money and can’t withdraw till after a certain period of time. Stopping them will be detrimental to the economy.”


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