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CBN, IFC seek self-regulation, consolidation in MfB sector

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Head of Training, Microfinance Learning and Development Center (MLDC), Adetunji Afolabi (left); Deputy Director, Other Financial Institutions Supervision Department, OFIDs, Central Bank of Nigeria (CBN), Bassey Duke; Country Director, International Finance Corporation, Eme Essien; Director, Special Insured Institutions Department, Nigeria Deposit Insurance Corporation, Joshua Etopidiok; Director, Other Financial Institutions Supervision Department, CBN, Tokunbo Martins; National President, National Association of Microfinance Banks and Managing Director, Hasal MFB, Rogers Nwoke; Coordinator, Nigeria Microfinance Platform, NLP in MLDC, Oyerinmade Oladejo; and Chairman of AFOS Foundation INGO, Nigeria, Tutu Ogunnaike, at the fifth symposium of the Nigeria Microfinance Platform in Ibadan, Oyo State.

The Central Bank of Nigeria, CBN, and the International Finance Corporation (IFC), have charged Microfinance Banks, MFBs to embrace self-regulation and consolidation 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 subsector.

These we highlights of the fifth yearly symposium of the Nigeria Microfinance Platform held in Ibadan, Oyo State, with the theme: “Self Regulation for Sustainability and Development of the Microfinance sector”.

The Deputy Governor, Financial Sector Surveillance, Central Bank of Nigeria, CBN, Mrs Aisha Ahmad, in a keynote address, at the event, stressed the need for self-regulation in the MFB sub-sector.

“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 organization comes into play,” he said.

Stressing the expectations 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, standardized 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 while self-regulation is important it will not happen immediately but gradually as operators and regulators work together.

She however, stressed that in addition to self-regulation, there is need for consolidation in the MfB 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, overtime 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.”

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.

He noted that self regulation among other things will eliminate the regulator-anxiety of the operator and enhances compliance, adding that it will also streamline compliance indicators according to size, status and risk framework of the microfinance banks.

He added that in addition to the above self-regulation will grossly reduce cost of statutory regulation and promote consumer protection.

However, he averred that for these to happen, there was need to develop effective mechanism for addressing noncompliance, standardized performance measures and requirements driven by best performing operators in sector.

He also said that in addition to these, there must be focus on developing, disseminating and promoting best practice through developing guidelines, ratings and codes of conduct.

Nwoke noted that CBN will also have to make MFB ratings a condition to receiving intervention funds and other incentives, and allow for peer-group differentiation, use of external validation, production of scores and penalties for non-compliance.”


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