By Providence Adeyinka
Microfinance Bank (MfBs) operators have advocated the need for regulatory support to attract investors in their bid to meet the April 2020 deadline for recapitalisation.
Speaking with Vanguard in this regard, former President of the National Association of Microfinance Banks, NAMB, Mr Valentine Whensu, noted that MfB operators have an option to either inject fresh funds or seek merger and acquisition, in order to meet the required 50 per cent recapitalisation deadline.
He said that the government and regulator would help the MfBs to attract investors by providing the right legal framework that would protect the current operators against defaulters while also creating the enabling environment for the SMEs to operate.
He said: “We expect that there would be pockets of investors into our industry, but a lot needs to be done to make it attractive from the government point of view and the regulator point of view.
“The right legal framework to protect the current operators against those who collect money and are not paying. If we have the right legal framework protecting us in such a way that if somebody owes us money and we sue them to court and the case is treated quickly, then we would be willing to extend credit.
“Also, if the small business people who collect the money have the right environment to operate, they would be willing to pay. If you look at the number of SMEs we have in this country, it is the MfBs that are closer to the SMEs, and a lot needs to be done. Before people can bring money they want to see the support you are getting locally before they can bring in their money,” he said.
Also speaking, Managing Director, Echo Microfinance Bank, Mr Ndoma Odey, said: “It is expected that by April 2020 if you are not recapitalized to the new categorisation, you should come with at least 50 per cent of the capital base of your category and begin to work the balance for April 2021. That is a challenge to so many, the economy is not too favourable, and it is a challenge to the MfBs because it is a recapitalization year. It is coming when everybody in the sector is looking for an investor, so it is going to be a lot of turbulence.”
Recall that the apex bank, in March 2019, through a circular signed by Kevin Amugo, the Director, Financial Policy and Regulation, extended the recapitalization date for the MfBs, directing them to meet half of the capital requirement set by April 2020.
The new requirement states that Unit MfBs shall comprise two tiers: Tier 1 unit MfBs, which shall operate in the urban areas of the society and Tier 2 Unit MfBs, which shall operate only in the rural, unbanked or under-banked areas.
Under the categorization, Tier 1, unit MfB is to be capitalized with N200 million, while Tier 2 unit MfB would have a capital base of N50 million. While the paid-up capital base of State MfB’s was raised to N1 billion, that of National MfBs was set at N5 billion.
According to the circular: “To aid the process of recapitalization, all microfinance banks shall be required to comply with the following: Tier 1 microfinance bank shall meet a N100 million capital threshold by April 2020 and N200 million by April 2021.
“Tier 2 Unit microfinance banks shall meet a N35 million capital threshold by April 2020 and N50 million by April 2021. A State microfinance bank shall increase its capitalization to N500 million by 2020 and N1 billion by April 2021 and national microfinance bank shall hold capital of N3.5 billion by April 2020 and N5 billion by April 2021.”