MICROCAPITAL.ORG STORY: Nigerian MFI, Integrated Micro Finance Bank Plc (IMFB), Temporarily Closes Doors Due to Lack of Liquidity

The Central Bank of Nigeria (CBN) has granted permission to Integrated Micro Finance Bank Plc (IMFB) to temporarily shut its doors due to a lack of short-term liquidity [1]. The announcement comes shortly after the unexpected resignation of IMFB Chief Executive, Mr. Simon Akinteye. According to Mr. Femi Fabamwo, Deputy Director of the Other Financial Institutions Department of the CBN, the short-term liquidity problems of IMFB were intensified when huge numbers of enraged customers demanded their money back. Lacking sufficient financial resources to meet depositors´ requests, IMFB appealed to the CBN, which has allowed it until next month to reopen.

IMFB, incorporated as a limited liability company in 2006, was the first of nearly 900 microfinance organizations to be licensed by the CBN. With over 70% of Nigerians living in poverty, IMFB´s mission is to “encourage self empowerment and growth which would ultimately eradicate poverty or reduce it to the barest minimum” through the provision of innovative products and financial services [3, 4, 5]. As of the end of September, 2008, IMFB reported total assets of USD 42.4 million, with a gross loan portfolio of USD 24.5 million, total deposits equalling USD 14.3 million, a debt to equity ratio of 1.24, and non-earning liquid assets as a percentage of total assets at 26 percent [6]. Until recently, it has maintained a strong performance history, earning a rating of five diamonds on the Mix Market and winning ´The Best Microfinance Bank in Nigeria Award´ by the CBN [1].

While the microfinance equity market has been plagued by a lack of liquidity, the announcement has raised eyebrows as it comes amidst a crackdown on Nigerian MFIs after growing complaints of corruption and fraud [7, 2]. According to a MicroCapital report issued earlier this year, the CBN threatened to dismiss and prosecute any senior officers and operators at microfinance institutions who have engaged in malpractice [8]. “Sources close to the bank said that the sacking of the staff aggravated the problem… This led to panic withdrawals as a lot of them were scared of losing their lives´ savings” [1].

The Board of Directors of IMFB, however, “explained that the resignation of Akinteye was necessitated by the current efforts made by the Board to raise fresh funds from both institutional and private investors in order to reinvigorate the bank, stating that the Board had concluded arrangements to inject over N1bn [an amount equivalent to USD 6.5 million] from internal sourcing and through partnership with two foreign investors to boost the bank´s capital base and expand its business operations” [1]. Meanwhile, the bank is undergoing restructuring and has already approved the appointment of Danjuma Ibrahim, former Regional Director, Northern operations, as the acting Director/Chief Operating Officer.

By: Stefanie Rubin, Research Assistant

Bibliography

[1] Agwuegbo, Amaka, “Irate Depositors Force IMFB to Close Shop¨, Individual.com, Sep 21, 2009. http://www.individual.com/story.php?story=107166233

[2] Moses-Ashike, Hope, “Microfinance or ´micro-corrupt bank,´ CBN urged to differenciate”, BusinessDay, Aug 17, 2009. http://www.businessdayonline.com/index.php?option=com_content&view=article&id=4495:microfinance-or-micro-corrupt-bank-cbn-urged-to-differentiate&catid=107:microfinance&Itemid=328

[3] Central Bank of Nigeria: http://www.cenbank.org/Supervision/Inst-MF.asp

[4] Integrated Micro Finance Bank Limited: http://www.imfb-bank.com/ceo.html

[5] The World Factbook: Nigeria: https://www.cia.gov/library/publications/the-world-factbook/geos/ni.html

[6] The MIX Market: http://www.mixmarket.org/mfi/imfb/data

[7] Callaghan, Ian, “Global Microfinance Investment Congress: The Evolving Landscape”, Jan 2008. http://www.microfinance-congress.com/docs/EN/Ian_Callaghan-Morgan_Stanley_GMI_%20Paris.pdf

[8] MICROCAPITAL.ORG STORY: Nigerian Central Bank Warns of Increase In Non-Performing Microfinance Loans, Poor Corporate Governance And Commits To Impose Sanctions On Errant Officials At Microfinance Banks: https://www.microcapital.org/microcapitalorg-story-nigerian-central-bank-warns-of-increase-in-non-performing-microfinance-loans-poor-corporate-governance-and-commits-to-impose-sanctions-on-errant-officials-at-microfinance-bank/

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