By Amaka Abayomi

Despite the tsunami that engulfed Nigerian microfinance banks in the last quarter of last year which led to the liquidation of 103 microfinance banks (MfBs) by the regulatory bodies, the sector is witnessing a new wave of confidence restoration with the registration of N200 million NAMBLAG Trust Fund for member MfBs.

At the end of the cleansing exercise by the regulatory bodies, N18 billion in depositors’ funds and an estimated N6 billion were trapped in the liquidated MfBs, while their non-performing loans amount to N8 billion.

Advocates of the NAMBLAG Trust Fund have grounded their argument on the line of action the apex bank followed when nine banks were discovered to be deep in distress.

They pointed out that rather than withdraw their licenses, the CBN sacked their MDs, CEOs and their boards; advanced them a lifeline of N650bn and closely monitored their operations.

*From left: Kemi Adeniran, Director; Dr. Angela Adegboyega, Chairman; Gbenga Biobaku, Director; and Segun Wilson, MD/CEO, all of King Solomon MFB at the bank's AGMI

They argued that a similar action should have been taken to rescue the distressed microfinance banks.

But their hopes came alive when, on 6th of July 2011, NAMBLAG Trust Fund was registered to serve as a lender of last resort for MfBs by providing short, medium and long term funds for MfBs so as to avoid liquidity shocks, complement the efforts of the Central Bank of Nigeria (CBN) to facilitate their growth and forestall the recurrence of license revocations by the apex bank.

According to the Chairman, National Association of Microfinance Banks (NAMB), Lagos State chapter, Mr. Olufemi Babajide, NAMBLAG would prevent MfBs from having shocks as a result of paucity of funds in the economy, will help in financing and refinancing of projects, and provide equity capital for the MfBs.

“There are currently 182 MFBs in rural and urban Lagos and can reach out to over 10 million people in the state. We have put in place a self regulatory committee to monitor very closely the activities of the members to ensure that corrections are made before things get out of hand in their operations.

“The Fund is open to all licenced MfBs in the country and would ensure that we remain liquid, increase outreach by empowering more people and protect depositors and investors funds.

“It would provide short term funds of up to N200m, while the medium and long term funds would run into units of billion and tens of billions of naira respectively. A fund manager, board of governors and fund custodian would be appointed.”

Expressing optimism on the usefulness of the fund, MfB operators said it is a step in the right direction, especially as they can’t continue to wait without end for the regulatory bodies to come to their aid.

Managing Director of Havilah MfB, Mr. Rufus Oluyole, urged members to subscribe to the fund as it would serve as both discount and investment window for them.

“It would serve as a discount window by helping members access funds in case of emergency and prevent us from crashing out due to lack of funds.

“It would also serve as an investment window as members are assured of better returns on investments than what deposit money banks offer them.

A managing director, who preferred to remain anonymous, said the fund is most needed as it would help MfBs save jobs, and not erode depositors’ and shareholders’ funds by keeping most MfBs alive.

For the Managing Director of Good Neighbours MfB, Mr. Ikechukwu Awa, “it is a good development as some of us can experience liquidity problems not necessarily because we don’t have money, but because there is a gap that needs to be urgently filled. It would help reduce the number of banks going under.”

Urging members to ensure that they sign on to the fund, the Managing director of King Solomon MfB, Mr. Segun Wilson, said only by making compulsory for members to make financial contributions would the fund serve its purpose.

“It should be signed on by all members and they should be required to make compulsory financial contributions toward the fund so as to avoid a situation whereby majority of the banks would live off a few banks who are financial members.”