By AKINOLA AJIBADE FOR THE NATION
The Central Bank of Nigeria (CBN) has introduced measures to sanitise microfinance banks (MfBs). In this report, AKINOLA AJIBADE examines how effective the measures are.
The microfinance banking sub-sector is plagued by problems such as inadequate capital, bad debt, management ineptitude, weak corporate governance structures, faulty accounting procedures and corruption.
Others are poor skills, inability of the operators to properly understand the concept of microfinance banking, among others. These have eroded confidence in the sub-sector, making it a source of concern to many, especially the Central Bank of Nigeria (CBN). To revive the operations of the 898 microfinance institutions, CBN introduced some far-reaching measures, which are part of its reforms agenda for the banking industry, aimed at putting the banks on the path of profitability.
Like what happened to commercial banks, the reforms in the microfinance banking were introduced, inter alia, to lay to rest the notion that the banks were no longer capable of recording growth.
The reforms
Part of the reforms is the introduction of the electronic format of rendering returns to CBN against the manual method; categorisation of banks into unit, state or national level; the imposition of a new capital regime of N20 million, N100 million, and N2 billion on the banks; and granting the banks a waiver not to participate in the microfinance programmes.
Others include examination of the books of the banks, and the directives on a uniform accounting year for them, among others.
Since the reforms were introduced, the banks have been making frantic efforts to improve their operations albeit at a greater cost. While many have adopted cost-cutting measures to stimulate growth, others are fine-tuning plans to get sizeable shares of the market. In all these, stakeholders have described the reforms as the best thing to
The microfinance banking sub-sector is plagued by problems such as inadequate capital, bad debt, management ineptitude, weak corporate governance structures, faulty accounting procedures and corruption.
Others are poor skills, inability of the operators to properly understand the concept of microfinance banking, among others. These have eroded confidence in the sub-sector, making it a source of concern to many, especially the Central Bank of Nigeria (CBN). To revive the operations of the 898 microfinance institutions, CBN introduced some far-reaching measures, which are part of its reforms agenda for the banking industry, aimed at putting the banks on the path of profitability.
Like what happened to commercial banks, the reforms in the microfinance banking were introduced, inter alia, to lay to rest the notion that the banks were no longer capable of recording growth.
The reforms
Part of the reforms is the introduction of the electronic format of rendering returns to CBN against the manual method; categorisation of banks into unit, state or national level; the imposition of a new capital regime of N20 million, N100 million, and N2 billion on the banks; and granting the banks a waiver not to participate in the microfinance programmes.
Others include examination of the books of the banks, and the directives on a uniform accounting year for them, among others.
Since the reforms were introduced, the banks have been making frantic efforts to improve their operations albeit at a greater cost. While many have adopted cost-cutting measures to stimulate growth, others are fine-tuning plans to get sizeable shares of the market. In all these, stakeholders have described the reforms as the best thing to
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