As CBN Mulls Capital Raise for MFBs, Operators Move to Strengthen Corporate Governance
¶Akie: microfinance banks are in forefront of country’s financial inclusion drive
¶Victor Dare: poor corporate governance, weak oversight grounded financial institutions
James Emejo in Abuja
The National Association of Microfinance Banks (NAMB) has reaffirmed its commitment to enshrine corporate governance at the core of members’ operation.
Chairman of NAMB, FCT Chapter, Mr. Francis Akie, said without corporate governance in the microfinance ecosystem, operators will be unable to comply with basic rules and regulations of the Central Bank of Nigeria (CBN).
He spoke at a specialized training on corporate governance for managing directors, chairmen and non- executive directors of MFBs in Abuja over the weekend.
He said the capacity building was particularly important given that the CBN is considering an increase in the minimum share capital of MFBs any moment from now.
He told THISDAY, “It is very important because if you are conversant with the system, you will know that central bank is even talking about increment in share capital.
“And for people to gather their money and then trust it into the hands of various individuals as directors to manage those funds, you must build your capacity well in order to manage those finances effectively.”
However, unlike the ongoing recapitalisation for deposit money banks and other categories of financial institutions, the CBN is yet to formally request a capital raise for the MFB.
However, the operators believed a recapitalisation programme is imminent, thus the need to be well prepared.
Akie said, “We have not gotten any deadline from the central bank yet, but we want to be proactive by ensuring that at any point in time that CBN calls on us to increase our capital, our capital is already increased.
“With this new capital raise for commercial banks, it means they now have deeper possess and can make more impact.”
Commenting on the continued relevance of MFBs in the country, the NAMB chairman, quoting CBN 2024 data, noted that microfinance banks alone contributed 95 per cent of total lending in the industry.
He added that microfinance banks also account for 85 per cent of Point-of-Sale (PoS) terminals in the country.
He said, “And as we speak, we have over 85 per cent of the Point of Sales (PoS) terminal in the country and microfinance banks are in the forefront of financial inclusion drive in this country.”
He said. “Because we deal with the people at the bottom of the pyramid, we are the people who know where they are and what they need from us. So, the microfinance bank is very important in this system of financial inclusion.
On loan recovery in the industry, he said, “For every business you have challenges and when you lend, there are certain challenges you also encounter in terms of recovery and that is why we are building this capacity.
“That is why we bring people together to train them that for you to give out money, you must have laid down procedures on how you can recover those monies.
“Because in banking it is said that the essence of credit is collection. So, for you to give out money, you must have procedures on how you collect these monies by way of collecting security, collateral and all that.
“So, when you have this in place, it becomes very difficult for a customer who has collected your money not to pay. But that notwithstanding, we still have few individuals that are not able to pay their loans based on maybe reasons connected to the economy of the country.
In his remarks, Founder/Chief Executive, Better Ways, Dr. Victor Dare, said poor corporate governance and weak oversight caused the collapse of many financial institutions in the recent past, adding that his engagement at the training was to lead discussions on corporate governance and compliance for board members and managing directors of microfinance banks.
He stated regulators and industry observers have identified governance lapses as a major challenge in the sector.
He said, “Corporate governance in the microfinance space reflects “a cocktail of good oversight and bad oversight”, stating that some institutions are owned by retirees without banking backgrounds who appoint career bankers as managing directors, often leading to boardroom disagreements and weak supervision.
However, he stressed that corporate governance goes beyond routine monitoring and compliance, describing it as the foundation of sustainability, profitability, and the going concern of any bank.
He said institutions should be assessed on individual merits, including the competence of board members and their working relationship with management.
On financial inclusion, he said Nigeria was utilising less than 30 per cent of the potential of microfinance institutions, attributing the gap largely to policy direction and the regulatory environment.
He warned that applying the same regulatory standards used for commercial banks could limit MFBs’ ability to serve low-income customers while remaining profitable.
