Repositioning MFBs for Effectiveness

Kenneth O. Eze
The money market community is cheered with news filtering out from the Central Bank of Nigeria (CBN) disclosing that the capital requirement of the sore sport of the banking sector, the microfinance banks is to be shored up shortly. The CBN is set to raise the capital base for MFBs to N100 million and N2 billion for unit and state institutions respectively.
This news is only welcome in the face of the success being recorded by the apex bank in effective supervision of the universal banks, as it gives hope that the same level of effectiveness will be extended to supervising MFBs. It is common knowledge that large capital base does not make a strong financial institution, hence the need for effective supervision of MFBs to ensure that operators do not travel the road of the banks that recapitalised under Prof Chukwuma C Soludo, the former CBN governor.
The need for effective supervision is reinforced by the necessity of ensuring the MFBs live up to their responsibilities of combating poverty at the grassroots. Nigeria’s poor that cannot approach the formal banking sector remain the majority of the population, hence while the financial services industry waits the formal unveiling of the CBN’s policy that will guide MFBs shortly, as disclosed by Kingsly Moghalu, its deputy governor, financial system stability, the need to include a clear guide on lines of products and services, as well as definite policies that would give the downtrodden motivation to seek relationship with MFBs while also giving the banks reasonable chance to render services to this not so educated segment would be welcome. It is in fact a necessity to evolve a system that would empower the illiterate Nigerian to aspire to develop banking relationship without fear of being done-in.
Any thing short of this would still alienate this critical segment of the population from minute loans of hundreds and thousands of naira that can transform the economy by impacting the lives of people in sub-urban communities. The dangers in this are two-fold; it would tempt the MFBs to chase the same business segment with their universal bank counterparts with attendant risks. Secondly, it would deny the peasants access to ‘chicken change’ that has the capacity of revolutionalising the national economy, which in part is what MFBs are established for all over the world.