By Amaka Abayomi
Operators in the microfinance sector have lauded the proposed mergers and acquisition option for microfinance banks (MfBs) by the Nigeria Deposit Insurance Corporation (NDIC), saying such is a welcomed development that would further enhance their operations.

Speaking on The Impact of Microfinance Sub-sector in Promoting Financial Inclusion in Nigeria, at the just concluded Financial Correspondents Association of Nigeria (FICAN) organized workshop in Dutse, Jigawa State, the Director, Special Insured Institutions Department, NDIC, Mr. B. D. Umar, said rather than closing MfBs, mergers and acquisitions should be encouraged.

“Mergers and acquisitions as opposed to outright liquidation should be encouraged in the sub-sector as obtains in other jurisdictions like Germany where no Co-operative Bank (equivalent of an MfB) has failed in the past 50 years).

“We have been able to establish that, so far, MfBs in Nigeria have generally performed sub optimally even if they are assailed by some operational challenges. We noted that the reform of the sub-sector is currently receiving the priority attention of stakeholders, particularly the Central Bank of Nigeria (CBN) and the NDIC so as to reposition it for enhanced service delivery.”

He also advised operators to ensure that they have the relevant skills and diligently work towards the implementation of the Revised Microfinance Policy and other reform initiatives that had been put in place by the regulators.

“Another challenge of the sub-sector is lack of relevant skills. This is because microfinance banking is different from conventional banking as it involves the provision of financial services to the lower segment of the market. Microfinance banking, therefore, requires specialised skills which are presently lacking in the country.”

This, MfB operators have said would boost the activities of operators and lead to enhanced provision of financial services to their clients, if the regulatory authorities would approve that option.

For the President, National Association of Microfinance Bank (NAMB), Mr. Mathias Omeh, having strong players in the microfinance sector can only be achieve through the options of mergers and acquisitions.

“We have encouraged that all along, especially for the weaker one to be acquired ands for the stronger ones to merge. It a unit MfB with unimpaired capital of N60 million can merge with another, it would be good for the sector.

“We need stronger MfBs that would be financially capable of providing financial services to the under-banked and unbanked, and mergers and acquisitions are sure ways of achieving that.”

Agreeing with him is the Chairman, Lagos State chapter, NAMB, Mr. Olufemi Babajide, who said that the state chapter has already inaugurated a Committee to look into the possibility of getting the regulatory authorities to approve that.

“It is a welcome development and we want all our members to come together and consider it, especially the financially weaker banks. Mergers and acquisitions are better that outright liquidation because if two or more weak Mfbs decide to merge, the result would be a stronger MfB that can perform its functions.”

While agreeing that it is a better option than liquidation, the General Secretary, Lagos State NAMB, Mr. Joseph Ajayi, urged those MfBs asked to recapitalize to consider the option as it may be their likely chance of remaining operational.