By Agency Reporter

Thursday, 24 Feb 2011

The National Association of Microfinance Banks has commended the Federal Government over its new plan to establish a special court to try loan defaulters.

Officials of the association gave the commendations in separate interviews with the News Agency of Nigeria in Lagos on Tuesday.

NAN recalls that a Deputy Governor of CBN, Dr. Kingsley Moghalu, on February 16, 2011, said that a special court would soon be established to try loan defaulters.

He said that the court would ensure quick resolutions of cases on loan defaults and encourage banks to give more loans.

Moghalu said that the CBN had sent a bill to the National Assembly to that effect.

President of NAMB, Mr Mathias Omeh, said that the establishment of a special court would ensure quicker resolution of cases on loan default.

He said that it would also enhance operations in the entire banking industry.

According to him, operators in the microfinance sub-sector have been facing serious problems on loan recovery which have been eroding their capital bases.

“The normal courts and other established organs do not possess absolute rights to deal with cases of loan defaults.

“Apart from this, the conventional courts are over-congested and by the time judgments are passed, the loans would have gone bad.

“It is my hope that as soon as the court becomes effective, the anguish that banks face when giving credit facilities will be reduced,” Omeh said

Chairman of Lagos Chapter of NAMB, Mr. Olufemi Babajide, also commended the move and said that the development showed that the CBN had a very strong desire to develop microfinance industry.

“Commercial court is a strong pillar needed by the microfinance banks and the entire baking industry.

“Although, we know that microfinance sub-sector is contributing about one per cent of the Gross Domestic Product.

“But I believe with these necessary structures, our contribution will rise to 10 per cent and above,” Babajide said.

Managing Director of Infinity Microfinance Bank, Mrs Clara Oloniyi, said the special court would help to curb excesses of defaulters.

“The rising cases of loan defaults and protracted litigations have affected operations of the banking industry.

“This new step, being taken by the CBN, is a giant stride,” Oloniyi said.

Source: Punch