The Central Bank of Nigeria (CBN) and the International Finance Corporation, (IFC) have charged microfinance banks (MFBs) to embrace self regulation and consolidation in order to enhance performance and sustainability of the sector.
Meanwhile, the National Association of Microfinance Banks (NAMB) has called for standardised performance measures and requirements for operators in the sub-sector.
These were the highlights of the 5th annual symposium of the Nigeria Microfinance Platform held in Ibadan, Oyo State, with the theme, “Self Regulation for Sustainability and Development of the Microfinance sector”.
In her Keynote address, the CBN Deputy Governor in charge of Financial Sector Surveillance, Mrs Aisha Ahmad, stressed the need for self regulation in the MFB subsector, saying: “A comprehensive oversight mechanism is required for effective supervision of microfinance activities of over 900 licensed MFBs; this is where the relevance of a self-regulatory organisation comes into play.”
Stressing the expectation of the CBN from MfBs operators in terms of self regulation, Ahmad, who was represented by Mrs. Tokunbo Martins, Director, Other Financial Institutions Supervision Department (OFISDs) , said: “We believe that the effectiveness of self-regulation in driving performance of the microfinance sector depends on an effective and efficient mechanism for addressing non-compliance, standardised performance measures driven by the best performing operators in the microfinance sector. It is , therefore, important that the umbrella associations set the tone right from the onset and clearly communicate their expectations which should be congruent with the regulators’ expectations for the microfinance industry.”
Also speaking, the Country Director of IFC, Mr. Eme Essien, noted that , while self regulation is important it will not happen immediately but gradually as operators and regulators work together. He, however, stressed that, in addition to self regulation, there is need for consolidation in the MfB sub-sector, noting that most of the MfBs in the country are small and their viability is fragile.
She said: “There must be pursuit of consolidation in the sector. We hope that the smaller banks will look for partnership with other larger ones. You can join forces, you can grow your network in that way, you can expand your offerings in that way, you can grow the credibility of the sector in that way and you can build trust among customers. In fact, over time, we see a very significant benefit in combining businesses. This will also reduce the pressure on the CBN. But, broadly, it will lead to a high level of sustainability in the sector so that the microfinance sector really has its place in driving financial inclusion in Nigeria.”
The NAMB President, Mr. Rogers Nwoke, averred that self regulation has been one of the cardinal objectives of the association since inception, adding that there is huge prospect for self regulation in the sector.