THE Central Bank of Nigeria is never responsible for its failed policies. It is always depositors that suffer. Whether it is the failed banks in 1994 or the collapse of community banks, the CBN walks away from it all, pretending everyone was at fault, except it.

Microfinance banks, promoted as the solution to the weakness of community banks, a CBN development initiative about 15 years ago, which failed woefully, are next in line of financial institutions CBN is crushing in its moves to prove that it is alive to its regulatory responsibilities.

In one swoop CBN has shut down 224 of the 820 microfinance banks it licensed. What was CBN doing while 224 banks wasted depositors’ funds? How has CBN addressed the weaknesses that led to the conversion of community banks to microfinance banks?

Like the community banks before them, CBN did not regulate microfinance banks beyond the licences it granted them. Years before it decided to act, microfinance banks were evidently living above their means.

From their bogus offices, the flashy cars to the staff they employed, microfinance banks started off with overheads that were not sustainable. They easily reminded one of the days of finance houses that tried to impress depositors with their flash and dash. Their fall was predictable.

Unlike microfinance banks elsewhere that serve as poor people’s bank, and tailor their services to save costs, the ones CBN superintended expended deposits on unnecessary expenses, blaming clients for not repaying loans.

There are fears that the number of microfinance banks that deserve their licences could still be less. Yet the question must be asked how CBN regulated this level of banking that was meant to create credit for the poor, and ran it into the same mess commercial banks managed to generate.

Even the microfinance banks CBN rates safe are on the verge of collapse following the panic withdrawals depositors have been making since the announcement. No depositor wants to be caught in the problems depositors faced after the collapse of commercial banks.

“As early as 8 a.m. today (Monday), we have been inundated with several of our customers who turned up to demand withdrawals from their accounts, apparently in panic response to the decision of the CBN to announce the closure of some of the microfinance banks”, a clerk at a microfinance bank in Abuja told a newspaper.

“We have not been able to do anything else than attend to customers who have come to withdraw money, despite notices that we are not affected,” she added.

Depositors suffer when banks fail. All the talks about Nigeria Deposit Insurance Corporation, NDIC, paying depositors proved false in former cases. There are no reasons to think things would be different this time.

NDIC has enough grounds not to pay, mostly the poor accounting systems of the banks that would leave out names of some of the depositors from their books. The onus is on depositors to prove they had business with the failed banks, as if the poor records the banks keep is the fault of their clients.

Worse cases are those who would be beneficiaries of the minimum amount NDIC repays, no matter the value of their deposits at the time of the collapse.

Effectively, microfinance banking is dead or would be very soon. Depositors are wary of approaching them, except to withdraw whatever they have left. The refusal of CBN to release names of the 596 banks it considers safe has left depositors to draw their own conclusions on the state of the remaining banks.

The impact of CBN’s decision on businesses microfinance banks support would be telling. What would these businesses do? NDIC recovering loans extended to clients scattered in as many locations, and more, as the banks, could be tougher than regulating microfinance banks.

CBN’s Deputy Governor, Financial Systems Stability, Kingsley Moghalu, announced the immediate revocation of the operational licences and closure of 224 banks declared either “terminally distressed” or “technically insolvent”, as if he was reading out a national honours list.

According to Mr. Moghalu, the affected banks failed a recent target examination CBN administered with NDIC on the 820 registered microfinance banks, to determine their ability to meet matured obligations to depositors. What other examinations did CBN carry out on the microfinance banks before this death sentence on 224 of them?

Did CBN provide the funds it promised to create when it started licensing microfinance banks? Something is terribly wrong with the way CBN makes its decisions. Its staff fail to do their jobs properly and the public suffers the consequences while these staff earn their promotions and retire to eternal comfort. It is unfair on depositors who CBN is supposed to serve.

Its decisions not to outsource regulation of the microfinance banks, after this most recent failure, is another cause for concern. It is beyond CBN’s capacity to effectively monitor operations of microfinance banks, in addition to its challenges with commercial banks.

Why it would hold unto the microfinance banks and regulate them to death, is what it is unwilling to explain to Nigerians – in fact it does not think it needs to explain to anyone.