By Babajide Komolafe & Amaka Agwuegbo Oct 11, 2010

In what is an unprecedented error by any regulatory body of its caliber, the Central Bank of Nigeria (CBN) has admitted that there were mistakes in the recent revocation of the operating licenses of 224 microfinance banks (MFBs).Although it is yet to publicly admit this, it has, however, secretly reversed the revocation of the operating licenses of about 33 of the affected MFBs.

 

“We are pleased to inform you that the CBN has given us the green light to reopen for business. We are sorry for the pain, anxiety and inconvenience caused you”, one of the affected MFBs, Newlife Microfinance Bank, stated in a text message on Thursday, informing customers of the reversal of the revocation of its operating license.

 

When confronted with this text message, a board member of the CBN told Vanguard, “Yes, it is possible that their license have been returned. You know they are so many in number, so it is possible that there were mistakes in the compilation of the list. I am aware that some of the cases are being revisited, but I can’t say more than that because it is not directly under me.”Head, Corporate Affairs, CBN, Alhaji Mohammed Abdullai also comfirmed this on Thursday but said only five of the MFBs were mistakenly included in the list by the typist that typed out the names.

 

That the apex bank indeed bungled the revocation of the operating licenses of the 224 MFBs was further confirmed by the Managing Director, Ikorodu Division MFB, Mr. Martins Nwankwo, when he confirmed that the apex bank has returned its operating license. He said the mistake was as a result of the restructuring in the CBN.“After the target examinations were conducted by the CBN, there were some restructuring in the apex bank and proper investigations were not conducted to ascertain the state of the MFBs.“But I thank God that our license has been re-instated because it has not been easy, especially with the customers and the extensive damage that has been done on the sector.”

 

However, the National President, National Association of Microfinance Banks, NAMB, Chief Mathias Omeh, whose MFB also had its license restored, said the association would not take a stand till it has carried out thorough investigations.Investigations, however, reveal that despite the restoration of their licenses, the affected MFBs might not recover from this monumental regulatory error, as depositors are already poised to withdraw all their money.

 

“Customers are queing to withdraw their money in MFBs that were not affected”, said the Lagos Chapter of National Association of Microfinance Banks at a press conference last week, warning that the revocation of the licenses 224 MFB could sound a death knell on the other ones.Shortly after the CBN Deputy Governor, Dr. Kingsley Moghalu, announced the revocation of the licences of the 224 MFBs on September 24,2010, some of them publicly faulted the inclusion of their names in the list, claiming they were not insolvent as announced by the apex bank.

 

In fact, those affected in the South West zone of NAMB instituted legal action against the CBN at the Federal High Court, Ikeja, Lagos, to challenge the revocation of their licences.In response to the claim of the affected MFBs, Abdullai, on Wednesday, however, accused the affected MFBs of being economical with the truth.

 

He told Vanguard “What happened was that the audit of the MFBs which led to the revocation of the licenses had a cut off date by which all the MFBs were expected to have implemented the recommendations arising from the joint examination exercise conducted by the apex bank and NDIC.“The MFBs were examined at different times and were given individual deadlines to correct the lapses observed by the examiners. But most of them did not correct these lapses and had not recapitalised by the time the examiners went to verify if they had complied with the recommendations. We went ahead and compiled the lists of those who had not complied with the recommendations and revoked their licences.

 

“The problem was that most of the affected MFBs did not expect that the CBN was serious about sanitising the subsector and so they were not serious about implementing CBN’s recommendations. But when they now heard that we have compiled list of MFBs to have their licenses revoked, they started to make haste to recapitalise,” he added, saying none of the MFBs challenging their revocation can prove to have recapitalised or corrected those lapses as at the deadline the CBN gave them.

 

He, however, said that there is hope for those who can prove that they have indeed recapitalised and corrected the lapses observed during the examination exercise.He said for this group of MFBs, the CBN will grant their owners new licenses based on new guidelines which will soon be issued by the apex bank.

 

This was confirmed by the Deputy Governor, Financial Sector Surveillance, CBN, Dr. Kingsley Moghalu, on Wednesday, on the Money Show of African Independent Television. He said, “There is no going back on the revocation of the licenses but if there is a case where fresh license is to be issued, it will.”

 

Source:Vanguard