Head, Internal Control and Audit, Olive Microfinance Bank Limited, Mr. Agbai Egbu, in this interview said that the Central Bank of Nigeria, CBN must enforce collateral registry on Microfinance Banks, MfBs operating in the country to drive the process, so as to achieve the aim for which it was initiated, while highlighting that the planned recapitalization would enhance a robust financial system and promote financial inclusion. Excerpt

By Providence Emmanuel

WHAT is your assessment of the response of MfBs subsector to the collateral registry?

The advent of collateral registry is a good development in the Nigeria banking sector as it will help to checkmate the incidences of credit default and collateral damage. Collateral registry reduces potential hassles MfBs face from non-repayment of loans if there is any pre-existing securing charge on the collateral being presented by the charger.

Collateral Registry will impact positively in reducing default rates if implicitly embraced by the microfinance banks.  The most notable risk perplexing the activities of microfinance banks is the Risk of over indebtedness whereby a single customer is exposed to other banks using one property to secure all the loans with different banks at the same time. This leads to collateral damage and nothing to hold unto in the event of default, with the collateral registry, the property pledged as collateral is strictly registered and protected for the existing loan. Registering the collateral will help to abrogate this incidence of over-indebtedness.  It is a gradual process, with more enforcement by the apex bank all the MfBs will embrace the use of collateral registry. CBN has more to do to educate the MfBs about the enhanced benefit of the collateral registry.

, Mr. Agbai Egbu

Do you agree with the CBN’s recapitalization plan?

The CBN’s plan to increase the capital base of MfBs is a good development. This will make them to be strong players in the industry. Increasing the capital base will make them sustainable and profitable. It will provide them with more funds to support small businesses. With increased capital, they will be stronger and reliable, stronger capital base will ensure a robust financial system and promote financial inclusion.

What is your projection for sub sector in the second quarter?

In the previous years, MfBs in Nigeria have had abysmal performance resulting from inadequate support by the government and low banking culture of Nigerians and lack of faith in the MfBs by the banking public. However, these challenges can be overcome due to the apex bank’ Risk Based Supervision intervention and also intervention funds being made available by the government through the Bank of Industry, BoI. Also, the advent of Bank Verification Number, BVN and Collateral Registry and other interventions will improve the subsector in the second quarter.

What are your expectations?

I expect to see increased funding by the government and donor agencies; improved and proactive supervision by the regulators.  MfBs should make more positive impact on the people through their outreach programmes by lending to more of the active poor people in the rural area using financial inclusion platform. MfBs should collaborate more with the telecommunication players to reach out to more people in the rural area. 2018 should be a momentous year for financial inclusion by the MfBs in Nigeria using digital financial space by collaborating with the telecommunication companies.

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