Source: All Africa.
Original news wire here.
Nigeria, October 27 – There are strong indications that the proposed Microfinance Inter-bank money market will take off by the end of this year.
It would be recalled that Financial Vanguard exclusively reported that some Microfinance Banks in the country have commenced moves to set up an inter-bank money market for the sub-sector.ket includes the five discount houses.
However, other financial institutions like micro-finance banks and primary mortgage institutions (PMIs) cannot participate in the market because they do not have direct access to the clearing house of the Central Bank of Nigeria hence the decision of microfinance banks to create their own inter-bank money market.
Investigation however revealed that the micro-finance inter-bank market was spearheaded by Financial Derivatives Limited. An inter-bank money market is a market where operators borrow and lend among one another. The market provides opportunity for them to invest their excess funds, and also borrow to cover temporary shortfall in their liquidity position. Apart from the 24 banks, other players in the Nigeria inter-bank money marration with Kakawa Discount House Limited.
Although details of the initiative is still been worked out, it was gathered that part of the preparatory measures is that microfinance banks would form a money market association patterned after the Money Market Association of Nigeria (MMAN), which is the umbrella body for bank treasurers.
It was gathered that the constitution of the association is been worked out while effort is been made to reach out to as many microfinance banks as possible especially those outside Lagos. Just as it obtains in MMAN, the proposed association would be operated by the treasurers of micro-finance banks while the banks would be members.
Financial Vanguard reliably gathered that the ground work like the rules and procedures for trading in the market have been concluded, while Kakawa Discount House will be the settlement agency and lender of last resort for the market.
It was further gathered that executives for Microfinance Money Market Association have been elected. A micro-finance operator who confirmed this development to Financial Vanguard disclosed that work is almost concluded on the initiative, except the constitution which is been fine-tuned, and it is expected to take off before the end of the year.
It was gathered that the Money Market Association of Nigeria (MMAN), the umbrella body of banks’ treasurers as well as the Central Bank of Nigeria (CBN) are not involved in this initiative. The CBN it was gathered will only be notified, as it is a purely private sector driven initiative.
On the need for the microfinance inter-bank market, head of operations, in one of the microfinance bank involved in the initiative recently told Financial Vanguard that the inter-bank market is very necessary for the sub-sector as it would afford microfinance banks opportunities to earn some income from the excess funds while those with temporary liquidity shortfalls will not panic but have the confidence to carry on their operations knowing that there is a market where they can always access funds.
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