Femi Fabamwo, Director of the Other Financial Institutions Department at the Central Bank of Nigeria (CBN), reportedly has said that mission drift at some microfinance banks, weak capacity for lending, poor understanding of the microfinance concept and inefficient delivery methodologies are some of the reasons why 103 microfinance institutions (MFIs) are being liquidated by the Nigeria Deposit Insurance Corporation (NDIC). Mr Fabamwo cited MFIs “operating like ‘micro-commercial banks’ with flamboyance, fleets of branded cars and high expenditure profile; hard impact of the global financial turbulence of 2008/2009; weak capitalization; poor corporate governance…and weak internal controls” as additional reasons reform is needed in Nigeria’s microfinance sector.
He also said CBN has adopted “a four-pillar reform policy of sanitization of the sector, capacity-building, restructuring and restoring public confidence” to repair the nation’s microfinance industry. The recent liquidation of failed MFIs and NDIC’s decision to repay depositors of the failed institutions—as MicroCapital reported in January—are part of this ongoing strategy to restore health to Nigeria’s microfinance industry [1].
By John Howard-Smith, Research Associate
About Central Bank of Nigeria (CBN): Central Bank of Nigeria (CBN), established in 1958, is Nigeria’s central banking authority. Its statutory mandates are as follows: “to issue legal tender currency; to maintain external reserves; to safeguard the international value of the legal tender currency; to promote monetary stability and a sound financial system in Nigeria; and to act as banker and financial adviser to the Federal Government.” As of July 2010, CBN reports total assets of NGN 7.37 trillion (USD 48.6 billion).
[1] Vanguard: “Why 103 MFBs failed – CBN”, http://www.vanguardngr.com/2011/01/why-103-mfbs-failed-%E2%80%94-cbn/
MicroCapital.org story, January 24, 2011: “MICROCAPITAL BRIEF: Nigeria Deposit Insurance Corporation (NDIC) Begins to Repay Customers of Failed Microfinance Banks”, https://www.microcapital.org/microcapital-brief-nigeria-deposit-insurance-corporation-ndic-begins-to-repay-customers-of-failed-microfinance-banks/
MicroCapital.org story, October 1, 2010: “MICROCAPITAL BRIEF: Central Bank of Nigeria Revokes Licenses of 224 Microfinance Banks”, https://www.microcapital.org/microcapital-brief-central-bank-of-nigeria-revokes-licenses-of-224-microfinance-banks/
MicroCapital’s Microfinance Universe profile: Central Bank of Nigeria (CBN), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Central+Bank+of+Nigeria+(CBN)
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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