Stakeholder wants CBN to reconsider plans to recapitalise microfinance banks

A public relations and advertising consultant, Prince Emman Omadivi, has urged the Central Bank of Nigeria (CBN) to reconsider its stand on recapitalisation of microfinance banks with a deadline of April 2020.

Omadivi, who is director in a microfinance bank in Nigeria, said the proposed recapitalisation would defeat the purpose of establishing MFBs.

He explained the primary purpose of MFBs to include, increasing financial inclusion rate in the country, improving access to financial services for the active rural poor and pursuing poverty eradication.

The director stressed that most of the existing MFBs were initially community banks that were set up by very poor publics, and advised state governments to use this opportunity to inject funds into the MFBs in their states to fight poverty, even if they have to acquire the institutions.

The CBN had, in a circular to all MFBs in the country, dated October 22, 2018, directed them to recapitalise and comply with effect from April 01, 2020.

Under the proposed recapitalisation, Unit Microfinance Bank is expected to have a minimum of N200million capital requirement, State Microfinance Bank, would need N1billion, while National Microfinance Bank would attract N5billion.

The circular stated among other things, that the sub-sector has been contending with such challenges as inadequate capital base, weak corporate governance, ineffective risk management practices, dearth of requisite capacity and mission drift.

While recommending merger, acquisition or direct injection of funds, it further stated that MFBs, as presently constituted, have been unable to meet the critical targets set out under the microfinance policy.

The consultant expressed concern that the planned action would force many MFBs to close down, adding that this would affect the same active rural poor.

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CBNPrince Emman Omadivi
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