Depositors of failed Microfinance banks may be paid within 90 days


By Stanley Oronsaye October 12, 2010 01:52AM


Barring last minute hitches, depositors of the microfinance banks whose licenses have been revoked may get paid within the next 90 days. The Nigeria Deposit Insurance Corporation (NDIC), the agency that is responsible for insuring all deposit-taking institutions said any delay may be due to the large number of institutions involved.


Haji Birchi, the corporation spokesperson, said verification had been concluded last weekend. “It is not an easy thing. We had to conduct verification to check depositors register, call on them to verify their claims. Payment will start within 90 days but if we finish verification before then, we can even call them to collect their money.” Mr Birchi said due to the large number of institutions involved the corporation is taking its time in order to do a thorough job.


Deposit insurance system

The deposit insurance system is to protect depositors and guarantee the settlement of insured funds when a deposit-taking financial institution can no longer repay their deposits. The maximum insured balance payable to microfinance depositors is N100, 000.


The Central Bank of Nigeria (CBN) last month revoked the operating licenses of 224 microfinance banks across the country on basis that they were “terminally distressed and technically insolvent”. The affected institutions were those with negative shareholders’ funds, negative capital adequacy ratios and negative liquidity ratios.


Mohammed Abdullahi, the CBN spokesperson said the NDIC took over the branches of the affected banks the following day after they were deemed insolvent. Mr Abdullahi said any microfinance institution that has any complaint against the revocation should make it formal. “If anybody has claims, we will issue them with another license,” he said, adding that a deputy governor, Kingsley Moghalu has already made an official position along this line on the matter.


The CBN in 2005 issued a new microfinance policy, regulatory and supervisory framework for Nigeria, which created a platform for the establishment of microfinance banks and established a framework for the CBN’s supervision of MFBs. At the last count, over 800 microfinance institutions had been issued operational license, before the revocation last month.


The CBN admitted recently that Nigeria’s microfinance sector has failed to have the expected impact on the economy due to misconception by the operators. According to the CBN, less than three percent of the rural population of Nigeria has access to microfinance services.


“Despite the importance and benefits of credit, there are socio-economic barriers inhibiting access to financial services such as education, gender, age, irregular income, poor infrastructure, and even geographical location,” the Central Bank stated.



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