H1: MfBs to see Decline in loan, income imminent

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THE Microfinance Bank, MfB, sub-sector will likely experience a drop in lending activities and income generation in the first half of 2019, H1’19, due to anticipated risky environment.

But they are likely to focus on recapitalisation to meet the new minimum capital requirement of the Central Bank of Nigeria, CBN, ahead of the April 2020 deadline.

Some of the operators, who spoke with Financial Vanguard, said that the CBN’s recapitalisation policy for the MfBs is tailored towards ensuring a sound, strong and efficient financial system.

Managing Director/Chief Executive, DavoDani MfB, Mr. John Ologe, said that the focus of most MfBs is to be able to drive recapitalisation for 2019.

Ologe stated: “I think the industry would get more strengthened because of the liquidity that would be injected and there would be better MfB activity because when they have more liquidity, they would be able to do more business and they would be able to train and pay a better salary to their staff.

“Note that deadline for recapitalisation is April next year, they gave us 18 months from October last year, and I expect a substantial part of the fund to come in this year, so we would have a better MfB subsector.”

Managing Director/CEO, Accion MfB, Mr. Taiwo Joda, said that the two major activities that will shape the industry significantly are the general elections and the commencement of the new CBN recapitalisation policy for MfB which is aimed at ensuring a sound, strong and efficient financial system.

He added that from the foregoing, it is expected that the sector may experience a lull in commercial activities and significant drop in loan generation and consequently income in the first half of 2019 due to increased electioneering activities, saying: “Business owners naturally would take necessary precautions and draw back in making key business decisions during the election period until they are able to understand and interpret the implications of the outcome of the exercise.

“The proposed consolidation of the sector on the other hand, will result in increased pre-consolidation activities which will involve merger and acquisition activities and arrangement by players in the sector.

We may also see significant reduction in number of MfBs operating in the country at the end of the exercise due to inability to come up with the required funding need.

“The proposed recapitalization of the industry is long overdue considering the benefits to the sector and the general economy. Hence the recent CBN directive is a welcome development and it is expected among other things to curb the challenges of capital adequacy facing the sector, reposition MfBs to meet critical objectives of the microfinance policy framework and equip the institutions towards improved performance.

“The exercise is also expected to boost public confidence in the sector and increase its ability to serve the target market. At the end of the exercise, the sector will have strong players that will have the financial capacity to undertake major initiatives that will impact positively on the target market.

“In 2019, it is expected that the CBN will come up with initiatives towards addressing the challenges of the sector to make it perform better. These include high cost of funds, ease of doing business, infrastructure and power challenges etc.

Except these are resolved, the MfBs’ ability to meet the objectives and expectations of the apex bank and the government will remain a mirage.

“I also expect to see an increase support to the sector from the regulators in the proposed consolidation exercise in order to achieve the benefits of consolidation in the sector.

We also expect the CBN to increase its engagement with the sector, address the challenges of the sector and provide increased access to the sector in the various intervention initiatives in the economy and to assist the sector in deepening financial inclusion in the economy,” he said.

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