Deputy Governor, Financial System Stability, CBN, Dr. Chiedu K. Moghalu

By Obinna Chima

The Central Bank of Nigeria (CBN) has said it will soon come out with a regulation on microfinance banks that will make the sub-sector effectively play its role in the economy.
Deputy Governor, Financial System Stability, CBN, Dr. Chiedu K. Moghalu, said this in a chat with THISDAY at a forum held in Lagos recently.
According to Moghalu, the banking sector watchdog would soon come out with a new supervisory framework for the sub-sector.

“There is a regulation of microfinance banks that is on-going. We are coming out with a new supervisory framework for microfinance bank with which there will be unit microfinance banks, States microfinance banks and national microfinance banks. That framework will improve the effectiveness of microfinance banks and their lending efficiency as well.

“Of course, traders and others that patronise microfinance banks will go to the size of microfinance bank that they can obtain the type of resources and interest rates that are mutually accepted between both parties. We are also working on the reform of microfinance banks, it is a process, it not an event, and I want people to be patient. There are problems which are being addressed. But I think the system is becoming more matured.”

Moghalu pointed out that microfinance banking was introduced into the country in 2005, adding that the sub-sector is still at its maturity stage.
“You find a lot of people that were affected by the consolidation of commercial banks in 2005, moved into microfinance banking with a mindset that was not that how a microfinance bank is operated. But the central bank is training and certifying microfinance operators to understand the philosophical basis of microfinance banking. So, with that, you create a new culture in the industry,” he explained.

Moghalu who attended a forum for directors of banks and other financial institutions, had also charged the directors to continue to discharge their duties responsibly, saying that the resolution of the banking crisis was not a guarantee against another crisis in future.

According to him, to sustain and consolidate on the gains of the reforms, complementary reforms are necessary in other areas of the economy. He however stressed that the central bank was committed to the continued safety, soundness and stability of the financial system.

But he stressed that the banking sector regulator “will take proactive steps to prevent the next crisis and create a more endurable framework for financial stability. So we are now looking into the future and in looking into the future, we are now talking about macro-prudential framework.”