THE microfinance bank industry recorded 5.2 percent decline in nonperforming loans (bad loans) to N25 billion in 2018 from N26.18 billion in 2017.
NDIC NDIC IFRS 9 implementation burdens insurance firms(Opens in a new browser tab) The industry, however, struggled in terms of profitability as profit before tax stagnated at N16.2 billion during the year.
The Nigerian Deposit Insurance Corporation, NDIC, disclosed this in its 2018 annual report, which also revealed 14.7 percent increase in total deposits of the industry to N191.41 billion in 2018 from N166.88 billion in 2017.
The report stated: “The MFBs’ sub-sector reported a gross income of N105 billion as at December 31, 2018 against N89.63 billion in 2017. Interest income also recorded an increase of 3.06 percent from N78.98 billion in 2017 to N81.40 billion in 2018.
Non-interest income slightly improved by 2.25 percent from N23.08 billion as at December 31, 2017 to N23.60 billion as at December 31, 2018. Profit before tax recorded a marginal increase of 0.06 percent from N16.21 billion in 2017 to N16.22 billion in 2018. But Return on Asset (ROA) and Return on Equity (ROE) decreased from 4.50 percent and 18.90 percent in 2017 to 4.22 percent and 18.19 percent in 2018, respectively.
“The total assets of MFBs stood at N384.50 billion as at December 31, 2018 against N360.59 billion as at December 31, 2017.
Likewise total loans and advances stood at N221.51 billion in December 2018 against N201.37 billion in December 2017. The NPLs decreased by 5.27 percent from N26.18 billion in December 2017 to N24.8 billion in December 2018. Similarly, the NPLs (portfolio-at-risk) ratio improved from 13 percent in 2017 to 11.20 percent in 2018 but still above the regulatory threshold of five percent.
“The MFBs’ total deposits increased, by 14.7 percent from N166.88 billion in 2017 to N191.41 billion in 2018. The average liquidity ratio also increased from 72.54 percent in 2017 to 73.95 percent in 2018, and above the minimum regulatory threshold of 20 percent.
“MFBs’ loan to deposits ratio stood at 115.73 percent as at December 31, 2018 against 120.66 percent as at December 31, 2017. NDIC stated: “During the year, the CBN granted one year extension to April 2021 for the recapitalization of MFBs. Furthermore, two tiers of Unit MFBs were created, namely: Tier 1 (Unit Rural) and Tier 2 (Unit Urban).
The capital requirement for Tier 1 Unit Rural MFBs was fixed at N50 million, while Tier 2 Unit Urban MFBs remained at N200 million. The compliance timeline was reviewed to allow MFBs sufficient time to recapitalize. The Tier 1, Unit-Rural MFBs are expected to raise their capital to N25 million by April 2020 and to N50 million by April 2021. In the same vein, Tier 2 Unit Urban MFBs should meet capital base of N100 million by April 2020 and N200 million by April 2021. The state and national MFBs were given up to April 2021 to meet the new capital requirements.
“In 2018, the number of licensed MFBs stood at 888. The South-West Zone had the highest number of operational MFBs of 309, against 361 in 2017. The number of MFBs in the South-South region also dropped to 90 in 2018 from 112 in 2017.
In the South-East, it dropped to 156 in 2018 from 177 in 2017. For the Northwest, it dropped from 132 MFBs in 2017 to 117 in 2018. “The North Central recorded a drop from 184 in 2017 to 147 in 2018. However, the number of MFBs in the North-East remained unchanged at 42.
“The NDIC examined 294 MFBs, focusing on their operations, board and management oversight, risk management practices, internal control systems, and the level of compliance with applicable laws, rules and regulations.
“In 2018, the NDIC paid N89.24 million insured deposits to 1,804 depositors of MFBs in-liquidation compared to 173 depositors of closed MFBs and N13.24 million paid in 2017. The significant increase was due to the 138 MFBs that were closed during the year. “The cumulative payment of N2.97 billion was made to 83,415 depositors of closed MFBs as at December 31, 2018, compared to N2.88 billion paid to 81,611 depositors of closed MFBs as at December 31, 2017.
“In the discharge of its obligation as Liquidator, the NDIC had made cumulative payments amounting to N116.258 billion to depositors, creditors and shareholders as at December 31, 2018. The breakdown includes payments of insured and uninsured deposits of N108.641 billion, N2.973 billion and N70.53 million to depositors of defunct DMBs, MFBs and PMBs, respectively”.