Depositors of Microfinance Banks and Primary Mortgage Institutions will receive an insurance cover of up to N0.1m or N100, 000 from the Nigerian Deposit Insurance Corporation, the Managing Director, NDIC, Mr. Ganiyu Ogunleye has said.


Managing Director, NDIC, Mr. Ganiyu Ogunleye

This means that in the event of any MFB or PMI going under, the NDIC will pay each depositor a maximum of N100, 000 as claims.

Ogunleye said this at a one-day seminar, organised by the NDIC in Abuja on Monday, just as he noted that the rate of rendition of statutorily returns by the MFBs had been unsatisfactory.
“For instance, hardly do up to 50 per cent of the operating MFBs and PMIs render statutorily returns as and when due even though such information is required to monitor the health of the institutions on an ongoing basis,” he said.

The NDIC boss also noted the presence of weak corporate governance as well as inadequate awareness or total lack of risk management processes in the MFBs and PMIs. Ogunleye said sound corporate governance and an effective risk management were critical to the viability of financial institutions.
“The challenge of weak corporate governance is one that we will tackle in the days ahead,” Ogunleye stated.

He called on financial institutions to urgently take steps to address the inadequacies.
He said that a recent survey carried out by the NDIC showed that the limit of N100, 000 per depositor covered a large proportion of depositors of MFBs.
Although he ruled out the possibility of waving premiums for the recently transformed community banks, he said the NDIC could offer finance houses in that category the opportunity of paying their premiums in instalments.

Besides, he said the corporation had the discretion to review the premium rates from time to time in response to the dynamics of the financial services industry.

“In the absence of a systemic crisis, the corporation’s disposition will be to consider a downward review of the premium rate, after building up adequate deposit insurance funds for MFBs and PMIs,” he said.
He said that in the long run, a differential premium system for MFBs and PMIs would be considered. Ogunleye said that the extension of deposit insurance to MFBs and PMIs would further strengthen the financial safety net in Nigeria.

The NDIC chief pointed out that as at January 2008, 716 MFBs had been granted provisional and final licences by the Central Bank of Nigeria, while 94 PMIs were in operation.