By Amaka Abayomi
The Central Bank of  Nigeria  (CBN) and the Nigeria Deposit Insurance Corporation  (NDIC) are set to introduce stricter regulations for microfinance banks this year.

A top official in one of the regulatory  agencies disclosed this to Vanguard saying the regulations are to ensure  that they perform optimally.

Speaking with Vanguard, a source close to NDIC, who pleaded anonymity, said MFBs that fail to meet the January 31st deadline for the granting of new licenses would be liquidated.

“One of our duties in NDIC is to ensure the safety of depositors’ funds, especially those in MFBs, making it necessary for these MFBs to be closely monitored to ensure the safety of such funds.

“To this end, at the expiration of the January 31st deadline, a capital verification exercise would be conducted on the 121 MFBs with provisional licenses to ascertain their financial status and any that fails to meet the laid down requirements would be closed down.”

It would be recalled that on September 24, 2010, the Central Bank of Nigeria, CBN, beamed its searchlight on the MFB sector, resulting in the revocation of the operating licenses of 224 MFBs found to be ‘terminally distressed’ and ‘technically insolvent’, which the CBN attributed to the impact of the global financial crisis.

The CBN thereafter granted provisional approval for new licenses to 121 of the 224 MFBs that made fresh capital injection and significant loan recovery, with a three-month deadline ending January 31st 2011 given for them to beef up their capital base or cease to be in business.

The requirements for the grant of new operating licenses to the 121 MFBs include capitalisation of prior deposits for shares and the new capital injection to bring the shareholders’ fund unimpaired by losses to the prescribed minimum of N20 million, good corporate governance, sound risk management system and strong internal controls to forestall avoidable losses, closure of unapproved branches, cash centers and customer meeting points, adoption of a true microfinance model, among others.

The NDIC source pointed out that measures such as review of the Microfinance Policy Framework, introduction of a new operational template to benchmark microfinance banking, capacity building to develop a critical mass of knowledge and skill, human resources as well as examining the possibility of introducing a Micro, Small and Medium Enterprise (MSME) Fund to catalyse a sustainable development of the microfinance space, are being put in place to ensure that MFBs live up to their responsibility of fostering financial inclusion, fighting poverty and empowering low-income and vulnerable groups.