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CBN strategises to ensure the growth of MFB sector

By Amaka Abayomi
The Central Bank of Nigeria (CBN) has listed strategies it has put in place to ensure the smooth implementation of the microfinance policy and ensure the growth of the microfinance sector.

Prior to the launch of the Microfinance Policy, Regulatory and Supervisory Framework for Nigeria in December, 2005, 65 per cent of the economically active population were excluded from formal financial services and were often served by the informal financial sector such as NGO-MFIs, money lenders, friends, relatives and credit unions.

To this end, Mr. Joe Alegieuno, Director, Development Finance Department, CBN, noted that the microfinance policy was put in place to elicit the participation of stakeholders in microfinancing and address the financial access challenge.

Alegieuno listed the strategies the apex bank has put in place to facilitate the smooth implementation of the microfinance policy to include the establishment of the Microfinance Advisory Board (MAB) in 2005 to coordinate and harmonize stakeholder interventions in the sub-sector.

The National Microfinance Policy Consultative Committee (NMFPCC) was established in 2006 to provide direction and guidance on the policy implementation.

An Inter-Agency Technical Committee on the Implementation of the Microfinance Policy was set up to address technical and conceptual issues/programmes related to the policy implementation

Also, the Entrepreneurship Development Centres was established in three geo-political zones (Lagos, Onitsha and Kano) on pilot basis in 2008 to build the capacity and enhance the quality of potential clients of MFBs.

He noted that the CBN embarked on sensitization and awareness campaigns to various stakeholders so as to encourage investors to set up micro-finance institutions, banks, Credit Bureaux, Rating Agencies, encourage governments to participate in the sub-sector and contribute to its development in the interest of their subjects, as well as educate them on ways of promoting sustainable microfinance programmes.

Deposit Money Banks are also encouraged to participate in microfinancing by setting up subsidiaries, departments or engaging in wholesale funding activities in favour of microfinance institutions; clients were enlightened on the opportunities in the microfinance sub-sector and enable them to access financial services; while Development Partners are encouraged to increase their activities in the sub-sector and ensure that they are aligned with the National Financial Sector Policy.

Alegieuno noted that the on-going review of the microfinance policy will address areas such as capital base, organic growth path, single obligor limit and restriction of operations of MFBs, among others.

On challenges facing the sector, Alegieuno said “Large number of institutions particularly converted  community banks with varied institutional set up, and diverse understanding on the practice of  microfinancing; lack of  capacity in practical microfinance banking, leading to possible mission drift by the operators; lack of sustainable source of wholesale funding for on-lending to MFBs and for social development; sub optimal existence of support institutions such as rating agencies, credit bureaux and in particular the Microfinance Development Fund are some of the challenges the sector is faced with.”

Alegieuno stressed that the CBN is taking steps to sanitize the sub-sector, particularly with the review of the Microfinance Policy and Regulation, implementation of the certification programme and the Operational Template for MFBs among other interventions.

“The CBN in particular will be the fulcrum of strategic steps to ensure that stakeholders understand their roles and responsibilities as the sub-sector undergoes changes to address the challenges earlier mentioned.

“Following the inauguration of the apex associations of MFBs and unlicensed MFIs, it is expected that their activities will complement that of the CBN in the area of self-regulation and capacity building for their members.”

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