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MfB operators identify deficiencies of CBN’s corporate governance code

By Providence Emmanuel

MICROFINANCE Bank (MfB) operators have identified some of the weaknesses in the codes of corporate governance for Other Financial Institutions (OFIs) in Nigeria, made available, February 2017, on the Central Bank of Nigeria’s website.

Recall that to strengthen governance practices, ensure high ethical conduct and provide minimum acceptable governance standards for Other Financial Institutions in Nigeria, the CBN developed distinct governance codes of corporate governance for the primary mortgage institutions, microfinance banks, mortgage refinance companies; development finance institutions, bureau de change and finance companies.

It was in the light of this that the Society for Corporate Governance (SCGN) penultimate week, organised a one day validation workshop for the review of the report of the corporate governance and board structure survey for MfBs with the theme: “Survey on Board Structure and Corporate Governance for Microfinance Banks in Nigeria” bringing together stakeholders in the MfBs subsector, CBN, among others.

SCGN in partnership with AFOS Foundation with support of the Office of the Director of Other Financial Institution Supervision Department (OFISD) of the CBN carried out a baseline survey on the governance structure of registered microfinance banks in Nigeria and to better present the peculiarity of the industry to the regulator in the midst of the proposed code of corporate governance for other financial institutions by the CBN.

Issues raised are that the CBN with the code is adding additional cost to the sub sector especially with regards to service of an independent consultant who would be charging consultancy fees. The CBN had in its draft stated that the code is applicable to all MfBs in Nigeria and that external auditors of MfBs shall report annually to to the CBN, the extent of the MfBs’ compliance with the provisions of the code.

Another argument was that the MfBs are divided into three categories of national, state and unit MfBs, and as a result of the structure and capitalisation capacity of the unit MfBs they cannot cope with the cost of servicing an independent consultant. Further to this is that if the CBN wants the MfBs to operate as MfBs, they must develop a template and not be using their template to measure MfBs board. Contrary opinions from a participant at the workshop was that the sub sector cannot not fit into global best practices because of costs involved.

Corporate goverannce an emerging thing for MfBs

In a separate chat with Financial Vanguard, Company Secretary, Fidson Healthcare Plc, Mr. Yomi Adebanjo, said: “Corporate governance in the MfB sub sector is non existent as you could see from findings but the reason it is not existent was not far fetched. Implementing corporate governance comes with a cost and if you look at the nature of that industry it is more or less small, their over heads are big enough for them when we factor in their operational cost of having to power the office.

“MfBs are in categories, most of them that have issue of cost are the smallest category not everybody. Those that operate national are like other banks just that they are microfinance in their sphere of operation, once all indices that affect their cost is addressed then corporate governance is a very simple thing.

“It is an emerging thing they will grow into it, I see them catching up quickly with the idea of board charter being adopted by them, I think in a matter of time we will see a difference. The code is not about CBN, it is an alignment with global best practices, when they measure you else where, they measure you according to best practice and best standard that is acceptable worldwide. It is for us to rethink our polity and get things in order.”

Code unacceptable for unit MfBs

In his argument, President National Association of Microfinance Banks, NAMB, Mr. Valentine Whensu, said: “these independent consultants would now be certified by CBN for them to come. The issue of cost is an issue in this industry. Again we say we don’t want to water down, we want to remain standard, it now becomes a basis of examination every year.

“How many MfBs in units are making money to take care of some of these costs? CBN standard will currently be different, we have three categories of MfBs, even if you want to put this into the code, the national who can afford it based on their capitalisation, structure and risk level, is not the same thing as the unit.

“If you set for national as a code, I dont have a problem but for the units that are still struggling, adding additional cost is a burden because consultants will start running everywhere to apply for this job. We need to work on that, it should not apply to unit mfbs.”

CBN is amenable to idea

Head Anti-Money Laundering/Counter financing of Terrorism, OFIs Department, Mr. Haruna Mustafa, said that the CBN is open to ideas promising that the regulatory body would look into some of the observations. He said: “the issue raised is very important, we are amenable to ideas, from consensus, we would look at the issue of limiting it to nationals. I think it makes sense, we would look into that.”

From one regulation to another, CBN watch it

Chairman of Coastline Microfinance Bank, Dr. Evelyn Urhobo, stated: “Since MfBs existence, what has CBN done for us aside from training, people put in money, we invested our funds, we are taking care of the poor people at the low level, we are not talking of MfBs in Lagos, in the Niger Delta for instance people that need assistance at the grass-root are the ones we are dealing with, what is CBN putting in.

I recall in the days of community bank, there were some sort of counter part funding that was coming from community board to help to grow. But since MfBs came into being it is all about regulation, one regulation or the other. There should be something done, anything to grow that sector, that vital sector which we know is actually performing. Microfinance Banks are vital parts of growing the grass root. CBN should come up with plan to help cusion that sector, a unit bank needs two good generators to operate, let me not go into the other overheads, it is massive. MfB is vital, lets not put additional burden, instead let the CBN go back and see how they can help to push out this vital sector.”

Develop a template for us to operate

According to Managing Director Alekun Microfinance Bank, Mr. Joshua Ukute, “If CBN wants us to operate as MfBs, they should develop a template for us rather than using their template to measure our board.



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