Central Bank of Nigeria (CBN) has said that microfinance banks are  already derailing from their core functions adding that it is also worried  about the skewed distribution of microfinance banks MFBs) in the country.

Chukwuma Soludo, CBN Governor

Head, Microfinance division, Other Financial institutions Department, CBN, Mr Joes Alegieuno stated this while speaking on “Microfinance Policy, Issues, Prospect and Challenges” at the seminar for Finance Correspondents and Business Editors organized by the apex bank in Kano last week.

He noted that the challenges to the microfinance policy are   dearth of skilled personnel with the right competence in the sub-sector, lack of functional support institutions, lack of functional support institutions,  compliance with code of corporate governance,  and skewed distribution of microfinance banks in the country as well as transformation of the existing Non-Government Organisation/microfinance institutions (MFIs)  to MFB.

Explaining, he stated, “Some of the microfinance banks, due to ignorance of the operating guidelines and lack of skilled manpower, are already derailing from their functions. Consequently, copious mission drifts have been observed in the service delivery models being adopted   by most licensed and converted MFBs, as they are currently running their shops as if they were mini conventional/universal banks.”

Also, “Out of the 716 MFBs spread across the country, 282 are located in the South West zone, 169 in the South East zone, 106 in the South South zone, 78 in the North Central zone, 48 in the North West zone and 33 in the North East. The numbers of MFBs that have been licensed in the northern part of the country is quite low and this is likely to hamper outreach in these areas.”

Further, “The policy stipulates that those to serve on the board of directors of the banks as well as management should have, in addition to prescribed educational qualifications, relevant banking or related experience. While the educational qualification might be met, many of the top management of the banks do not have practical microfinance banking and this impairs their supervisory functions in the management of the banks.”

“The microfinance policy provides that some institutions that will support the orderly development of the sub-sector be put in place. These include the certification programme, credit bureau, rating agencies, microfinance development fund, apex association of microfinance institutions and banks e.t.c. However, the pace of the establishment of these institutions has been slow and this might negatively impact on the development of the sub-sector.”

“There is lack of comprehensive information on the institutions offering microfinance services in Nigeria. Also lacking is information on types of services offered, number of clients served, amount of loans and savings etc. provided by the institutions”.

“A recent survey by the CBN showed that nine MFIs out of 36 in 13 states of the federation had up to N20 million minimum capitals required for licensing of MFBs. However, owing to ignorance of these MFIs on the procedures for licensing and the incentives thereon, they have not applied for licensing”.