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2020: Vibrant microfinance banking sector to emerge with higher turnover

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By Providence Adeyinka

Recapitalisation: MfBs canvass regulatory support to attract investors
Banking hall

A MORE vibrant  Microfinance Bank, MfB, sector is expected to emerge in 2020 buoyed by the Central Bank of Nigeria, CBN’s mandated recapitalisation exercise.

The new capital requirement mandates Tier 1 unit MfBs to N200 million capital base, N50 million capital base for Tier 2 unit MfBs. While the paid-up capital base of State MfB’s and National MfBs were raised to N1 billion and N5 billion respectively.

Speaking on expectations for the microfinance sub sector in 2020, Managing Director/Chief Executive, Trustfund Microfinance Bank Limited, Mr. Victor Ohuoba, said that the year is going to be an interesting one for MfBs who are able to recapitalize and ready for the challenge.

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He said that by raising their capital base, the MfBs would attract more funding and partnership with government agencies and foreign agencies that are willing to extend grant or cheap funding.

Ohuoba stated: “Right now, some MfBs are already getting some capital aid and more capital means more capital to do business. We expect a more vibrant microfinance banking sector. Because of recapitalization, MfBs would now have more money to do business. But in the process of recapitalization, we expect some business combination to come up by ways of mergers and acquisition. And because they are now stronger and bigger they would be able to attract more funding and partnership by government agencies and even foreign agencies will be willing to extend aids, grants or cheap funding to MfBs because of their better footing.

“All these would translate to better remuneration and welfare of staff. It is expected that the MfBs would embrace more technological innovation by investing in technology. Of course these would also lead to better customer service. The MfBs would have a higher turnover in 2020, it is going to be an interesting year and only those who can recapitalize and ready for the challenge would survive,” he said.

Also speaking, Managing, Director, Okuta Microfinance Bank Limited, Apostle Blessed Dike, said except the CBN review its policy downward, it might be catastrophic and a lot of the MfBs might exit from the market. According to him, “nobody knows what percentage of the MfBs would be able to scale through the hurdle of the recapitalization deadline of 50 percent set for Aril 2020. Except the CBN review its policy downward, it might be catastrophic and a lot of the MfBs might exit from the market. And if such happens, it would be catastrophic to this economy.

“There are more Unit MfBs in the industry than the state and national. If about 50 percent are not able to scale the hurdle by April 30, what happens to the economy? MfBs that are unable to meet N20 million recapitalization in the past years, where would they get 35 million by April 2020. It is going to be rough for our sector.”

Meanwhile, Managing Director, Edfin Microfinance Bank Limited, Mrs. Bunmi Lawson, said that the MfBs should be more willing to give loan to micro entrepreneurs to aid their business at a time when economic growth is still low.

Lawson said: “While we are praying for economic growth, I have not yet seen that all the things that are needed are in place for that economic growth. Growth rate may still be around six percent, what this means is that micro entrepreneurs would need loan but let’s hope the continued economic slow growth would not affect their ability to repay.

“MfBs must ensure to give loan to small businesses so that they are not affected during the economic slowdown. Sectors like education would remain stable, food would remain stable, essential commodities would be stable but luxury goods would be expensive. People are not buying luxury anymore.”

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