MFBs Lose N4Bn to Poor Management, Overhead Costs

Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have said that many microfinance banks (MFBs) in Nigeria are undercapitalised and are at risk of being distressed.

CBN and NDIC also said that microfinance banks in the country are making losses due to lack of enterprise risk management strategies and large overhead costs.

Speaking on Tuesday at a one day sensitisation workshop on: "Deepening the Practice of Microfinance Banking Through Effective Enterprise Risk Management," organized by the NDIC for MFBs in Lagos,  Alhaji Ahmad Abdulahi, CBN director, Other Financial Institutions Department, said MFBs in the country made a loss of N4 billion last year.

He noted that the non-performing loans of the MFBs as of June 2015 rose to as high as 45 per cent, a far cry from the regulatory range of five per cent.

Abdulahi also said many MFBs capital base had been eroded through losses and increasing NPLs.

Stating that the licenses of 83 MFBs were withdrawn between January and September, he said CBN and NDIC were in the process of withdrawing more licenses of distress-prone and undercapitalised MFBs.

While some MFB operators at the workshop lamented that the burden of overhead cost had been put on them by the CBN, Abdulahi assured that the CBN was in the process of reviewing the guidelines for operating MFBs in the country.

In his address, Alhaji Umaru Ibrahim, managing director and chief executive of the NDIC who was represented by Alhaji Gidi Umar, said only 180 out of the 932 MFBs operating in the country have implemented Enterprise Risk Management.