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MfBs’ bad loans drop by 5.3% to N25bn — NDIC

By Providence Emmanuel

Nonperforming loans (bad loans) in the microfinance industry declined by 5.2 percent in 2018 to N25 billion against N26.18 billion in 2017.

NDIC
NDIC

The Nigerian Deposit Insurance Corporation, NDIC, disclosed this in its 2018 annual report, which also revealed 14.7 percent increase in total deposits of the industry to  ¦ 191.41 billion in 2018 from  ¦ 166.88 billion in 2017.

The report further stated: “Profit before tax recorded a marginal increase of 0.06 percent from¦ 16.21 billion in 2017 to  ¦ 16.22 billion in 2018.

“The total assets of MFBs stood at  ¦ 384.50 billion as at 31st December, 2018 against¦ 360.59 billion as at 31st December, 2017. Likewise total loans and advances stood at¦ 221.51 billion in December 2018 against¦ 201.37 billion in December 2017. The NPLs decreased by 5.27 percent from  ¦ 26.18 billion in December 2017 to  ¦ 24.8 billion in December 2018. Similarly, the NPLs (portfolio-at-risk) ratio improved from 13 percent in 2017 to 11.20 percent in 2018 but still above the regulatory threshold of 5 percent.

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“The MFBs’ total deposits increased, by 14.7 percent from  ¦ 166.88 billion in 2017 to  ¦ 191.41 billion in 2018. The average liquidity ratio also increased from 72.54 percent in 2017 to 73.95 percent in 2018, and above the minimum regulatory threshold of 20 percent.

“MFBs’ loan to deposits ratio stood at 115.73 percent as at 31st December, 2018 against 120.66 percent as at 31st December, 2017.

NDIC stated: “During the year, the CBN granted one year extension to April 2021 for the recapitalization of MFBs. Furthermore, two tiers of Unit MFBs were created, namely: Tier 1 (Unit Rural) and Tier 2 (Unit Urban). The capital requirement for Tier 1 Unit Rural MFBs was fixed at  ¦ 50 million, while Tier 2 Unit Urban MFBs remained at  ¦ 200 million. The compliance timeline was reviewed to allow MFBs sufficient time to recapitalize. The Tier 1, Unit-Rural MFBs are expected to raise their capital to  ¦ 25 million by April 2020 and to  ¦ 50 million by April 2021. In the same vein, Tier 2 Unit Urban MFBs should meet capital base of  ¦ 100 million by April 2020 and  ¦ 200 million by April 2021. The state and national MFBs were given up to April 2021 to meet the new capital requirements.”

Regional spread

The regional spread of the MfBs also recorded significant declines.

According to the report: “In 2018, the number of licensed MFBs stood at 888. The South-West Zone had the highest number of operational MFBs of 309, against 361 in 2017. The number of MFBs in the South-South region also dropped to 90 in 2018 from 112 in 2017. In the South-East, it dropped to 156 in 2018 from 177 in 2017. For the Northwest, it dropped from 132 MFBs in 2017 to 117 in 2018. The North Central recorded a drop from 184 in 2017 to 147 in 2018 However, the number of MFBs in the North-East remained unchanged at 42.

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“The NDIC examined 294 MFBs, focusing on their operations, board and management oversight, risk management practices, internal control systems, and the level of compliance with applicable laws, rules and regulations.

“In 2018, the NDIC paid  ¦ 89.24 million insured deposits to 1,804 depositors of MFBs in-liquidation compared to 173 depositors of closed MFBs and N13.24 million paid in 2017. “The significant increase was due to the 138 MFBs that were closed during the year. The cumulative payment of  ¦ 2.97 billion was made to 83,415 depositors of closed MFBs as at 31st December, 2018, compared to N2.88 billion paid to 81,611 depositors of closed MFBs as at 31st December, 2017.”

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