CBN explains delayed intervention in micro-finance sector



The Central Bank of Nigeria (CBN) at the weekend said it delayed in taking actions on the widespread rot in the micro-finance sector to enable it do a thorough audit of the sector as well as also allow time to effectively conclude a new policy framework that would be released soon.



The audit of the micro-finance sector just concluded by the CBN saw Integrated Micro Finance Bank, MIC Micro Finance Bank alongside other 222 MFBs lose their licences due to operational inefficiencies.



Addressing a press conference on the outcome of the sector audit and major policy actions at the weekend, Kingsley Moghalu, CBN deputy governor, financial system stability, said the 224 MFBs that lost their licences representing some 27 percent of the total institution in the sector were found to be “terminally distressed” and “technically insolvent” and/or had closed shop for at least six months.



His words: “You must understand that when you have almost 900 banks MFBs in a country, it challenges quite significantly the supervisory capacity of the regulatory authority. So we have spent some time and we are still in the process of building up this regulatory capacity in order to be able to meet the challenges that we find in the sub-sector.



“Secondly, given our focus on the commercial banking reforms that have taken place over the past one year in which a lot of our energy has gone in, without neglecting the micro-finance sector, we decided to strategically sequence our regulatory policy actions in the whole financial sector and we decided to take the reforms of the commercial banks to a critical mass before we come out with the actions on the micro-finance banks.

“That is why we began the investigations and the audit this year. It took some time, having started in February, it took quite a while, about six months, we wanted to do a thorough job, we didn’t want to rush to judgement, we didn’t want to take hasty or precipitate action just because it has been common knowledge that the MFB sector has been performing below par, broadly speaking.




“And thirdly, we wanted to align the regulatory policy actions that we were taking with the review of the micro-finance policy framework. The review of that framework had to get to certain stage because it is a consultative process; it had to get to a certain stage before we could come out with the results of this investigation so that the result of the audit and the new policy will be released almost simultaneously”.




(Source : BusinessDay)


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