By Providence Emmanuel

Foreign investors have injected funds into 20 microfinance banks (MfBs)  in a bid to aid their compliance with    the new minimum capital requirement of the  Central Bank of Nigeria, CBN.

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Director, Other Financial Institution Supervision Department, OFISD, CBN, Mrs. Tokunbo Martins, disclosed this at the 4th National Association of Microfinance Banks, NAMB, Lagos Chapter, NAMBLag, training and retreat for Chief Executives of MfBs.

Martins, represented by Assistant Director, OFISD, CBN, Mr. David Adelana, further revealed that some MfBs operating in the cities are applying to relocate to the rural areas in order to meet the minimum capital requirement for the sub sector.

Adelana stated: “Between January this year, we have about twenty MfBs that have been recapitalized by foreign direct investment, people are bringing in money, they are seeing opportunities in that sector and we that are in that sector, what do we see?

“If foreign investments are coming in and they are taking up investment in insolvent banks, it means they are seeing something. So we need to examine our own position where we find ourselves. What CBN and Nigeria Deposit Insurance Corporation, NDIC are doing is to create enabling environment for MfBs to be able to operate.

He added that the apex regulator decided to raise the minimum    capital requirement for the MfBs    to enable them play bigger role, saying: “While some banks are focusing on how to recapitalize to meet the new requirement, some are not. The CBN has come up with the requirement and we are expected to play in that game.

“I happen to be one of the committee that worked on the minimum capital requirement. Initially, the capital requirement that was given was N1billion for all the Unit banks, and some people had to fight in form of negotiation. Management had certain things in mind when they were looking at jacking up the capital and they are looking at the MfBs playing bigger role and we are considering a situation where, with N1billion, you are able to open as many branches as possible.

“If we have over one thousand MfBs and we still have so many local government without a bank branch, then what do we now have in mind in driving financial inclusion? What we are looking at is not about killing the sub sector, we are focusing on strengthening the sub sector, starting with financial capacity before looking at other things,” he said.

Earlier in his welcome remark, Chairman, NAMBLag, Mr. Omololu Fatunbi, said that the retreat was organised to position and discuss possible ways to exploit the theme of the training.

Fatunbi said that the sub sector was established with the aim to collectively agreeing    to strengthen and position, not only as sustainability, but more crucially, for faster delivery of the mandate service and impact to its members to assist the regulatory bodies to enforce the rules, regulations and policies of government in the microfinance sector.

Also speaking, Head, Department of Accounting, Pan African University, Prof. Onafowokan Oluyombo, advised MfBs to take advantage of the recapitalization exercise taking place in the sub sector, while also highlighting some key issues for consideration post recapitalization.

Oluyombo said that capitalization would lead to increase in capacity to lend, network of branches, adding that there is a need to maintain competition given the low level of financial development and greater prevalence of market.

He pointed out some of the consequences of MfBs recapitalization to include    change in the bank ownership structure through internal funding; venture capital investment; institutional investors initiative; merger and acquisition; sale of strategic partnerships, either local or foreign; among others.

He advised MfB executives to take advantage of fintech by aligning with IT companies which is one of the available opportunities, stating: “Go into alliance with fintech companies, merge or build alliances with domestic or foreign owned bank and tech companies. We cannot do anything with without fintech. Fintech is an opportunity rather than a challenge in Nigeria,” he said.

On the other hand, Director of Special Insured Institutions Department, SIID, Nigeria Deposit Insurance Corporation, NDIC, Mr. Joshua Etopidiok, described the upward review of the minimum paid up capital for MfBs    as timely, adding that sufficient funds were needed to buffer losses arising from non performing loans and other income generating activities.

Vanguard