By Amaka Abayomi
With the first official purging of the microfinance sector in 2010, four years after the introduction of the microfinance policy in Nigeria, depositors of the closed banks can now heave sighs of relief as the Nigeria Deposit Insurance Corporation (NDIC) has concluded payment of the first batch of depositors.

The Central Bank of Nigeria (CBN) on September 24, 2010, revoked the operating licenses of 224 microfinance banks (MFBs) across the country on basis that they were “terminally distressed and technically insolvent”. The affected MFBs were those with negative shareholders’ funds, negative capital adequacy ratios and negative liquidity ratios.

To this end, the NDIC commenced liquidation of the affected banks with its staff deployed to branches of the 224 closed MFBs with the aim of verifying deposit liabilities of each bank with a view to expediting payment of insured deposits.

According to unconfirmed reports, the total deposits in the 224 MFBs was put at N18.2 billion, while total loans as reflected in their books amounted to N19.6 billion. Their combined shareholders’ fund is valued at N6.1 billion.

CBN later granted provisional approval for new licenses to 121 out of the 224 MFBs that had made fresh injection of capital and made significant loan recovery subject to the fulfillment of some specific requirements within three months.

“The requirements for the granting of new operating licenses to the 121 MFBs include the capitalisation of prior deposits for shares and the new capital injection to bring the shareholders’ fund unimpaired by losses to the prescribed minimum of N20 million, good corporate governance, sound risk management system and strong internal controls to forestall avoidable losses,” the CBN said.

Officials of a closed MFB preventing customers from entering the premises

Thus, of the 224 MFBs whose operating licenses were initially revoked, 103 are being liquidated by the NDIC, which started payments on December 6th 2010.

Vanguard’s investigation reveals that of the closed 103 MFBs, customers of 76 MFBs were paid in the first batch which started December 6th and ended 2 weeks ago, while the second batch of payment of customers of additional 7 MFBs will commence today, Monday 17th.

All efforts to get the exact amount already paid to customers proved futile as officials of the NDIC are still collating data from the various branches of paying bank, making it difficult for them to confirm the total amount that has been paid out.

A source close to the NDIC, who spoke under the condition of anonymity, who refused to disclose how much has been paid, said the payment in batches is to make it easier and ensure that customers who turn up are paid.

“Presently, we are paying through Intercontinental Bank, so all the customers need to do is to go to any Intercontinental Bank closest to the closed MFB to process their payment the maximum being paid any depositor despite the amount in the closed bank is N200,000.

“The 2nd batch of payment would start on Monday (today) and we will be paying customers of 7 more MFBs. The remaining will come up in the 3rd batch, but on January 24th, we will be paying customers of Integrated MFB because of their large branch network and customer base.”

When contacted, the Executive Secretary, National Association of Microfinance Banks (NAMB), Alhaji Kabiru Yar’Adua, advised operators to ensure that their books are in order as one can never tell what will happen next.

“Though I am not privy to the number of customers or the total deposit base of the closed 103 MFBs, but I know that the initial 224 MFBs short listed had a deposit fund of almost N20bn. The closure of these banks is a positive one as the healthy MFBs have been separated from the pack and confidence will be enhanced in the sector.

“I only hope that operators would learn one or two lessons from what has happened and carry out proper microfinancing in the country as the regulatory bodies may still have some more surprises up their sleeves.”

In the same vein, the Treasurer of the NAMB, Mrs. Bunmi Lawson, said the negative effects could be less if properly managed.

“The effects could be positive or negative, depending on how the situation is managed. Though some of these banks have closed shop before the CBN’s closure, but a lot of banking public were doubtful if the banks were insured by the NDIC and if their moneies would be paid them.

“But with the NDIC living up to expectation, operations in the sector would be greatly boosted as the MFB banking public would be rest assured that their deposits are insured. This translates that their money is secured and would be paid them should anything untoward happen to their bank.”

The Nigeria Deposit Insurance Corporation is established to protect depositors and guarantee the settlement of insured funds when a deposit-taking financial institution can no longer repay their deposits, thereby helping to maintain financial system stability. The maximum insured balance payable to microfinance depositors was raised from N100, 000 to N200,00.