Following conplaints that greeted the revocation of licences of 224 microfinance banks in the country, the Central Bank of Nigeria (CBN) re-issued new licences to 121 MFBs out of the 224 licences earlier revoked.  ZAKA KHALIQ in this piece examines the whole revocation saga and its impact on the young microfinance industry.
“NOBODY wants to invest in the microfinance sub sector. The belief of everybody now is that the microfinance sector stinks and nobody wants to be associated with it. People are not saving, rather they are withdrawing the already saved money,” says Mrs. Angela Adegboyega, chairman, King Solomon Fund (KSF) Microfinance Bank while commenting on the recent revocation exercise carried out by the Mallam Lamido Sanusi -led Central Bank of Nigeria(CBN).
She also added that the development has affected loan recoveries of the affected banks, pointing out that customers who are willing to repay their loans cannot do so, and as such, MFBs fund are trapped outside. She described the revocation as too harsh on operators, saying  even the non-affected banks are now affected.
The revocation of licences of about 224 microfinance banks in the country has attracted huge criticism from microfinance operators in the country. Some of the revoked MFBs had earlier criticised the revocation exercise, saying, some of them had already complied with the CBN’s recommendation even before the revocation exercise was carried out.                                                                                                                                      
However, in response to a series of complaints from MFBs as regards the revocation of their banks, the apex bank recently verified those claims to ensure that they were genuine claims.                                                                                                                                      Speaking with BusinessWorld last week, Mr. Muhammed Abdullahi, head, corporate affairs, CBN said, “Some of the banks claimed that they have met the CBN’s standard. This is in terms of capital base and corporate governance. So, what the regulatory body did was to go into these MFBs and verify whether they have satisfied our requirement.” But experts argue that the damage had already been done before amendment was made.

The Damage Earlier Done
When CBN issued the list of 224 microfinance banks recommended for revocation, it caused panic and stampede in the microfinance industry, such that customers  besieged MFBs nationwide to claim their deposits. In the aftermath of this, withdrawals in all MFIs skyrocketed, just as deposits were  not forthcoming, while loan customers have failed to repay.
The condition was equally made worse with 4,480 workers of microfinance banks thrown into the labour market, just as about 13,444 dependants were equally affected, hence jacking up the unemployment as well poverty level in the country.
When BusinessWorld contacted the affected banks, majority  said the news came to them as a shock, as they thought CBN would have given them time to restructure, merge or be acquired.
Mrs. Ifeoma Ana, managing director, Elim Microfinance Bank on her part said the revocation was illegally carried out, saying it has affected the credibility of not only the revoked MFBs, but all microfinance houses.
Mr. Olutayo Adenekan, chairman, National Association of Microfinance Banks(Namb), Lagos chapter, believes that even with reduction in the number of revoked microfinance institutions, foreign as well as some local investors are pulling out of the market. This development, he said would not only jeopardise the motive of the federal government to reduce poverty, it will also kill the dream of the young industry.
In this case, the association has  dragged both the CBN and NDIC to court for what it called illegalities in the revocation process. 

121 New Licences up for grab
The CBN said it has granted new licences to 121 microfinance banks whose licences were previously revoked in the country.                                                                                                   The CBN had earlier revoked the licences of 224 microfinance banks nationwide because they were found to be ‘terminally distressed’ and ‘technically insolvent’.
However, the apex bank said of the 224 MFBs, 121 microfinance houses have been issued new provisional licences after they have fulfilled some specific requirements.                                                   
The provisional approval, CBN said would only be effective for three months, after which comprehensive pre-licencing examination and capital verification will again be conducted before the new licence will be granted to those found eligible. The CBN in a statement signed by Muhammed Abdullahi, head of corporate affairs, said the 121 MFBs are those institutions that had made fresh capital injection and made significant loan recovery, as confirmed by a recent capital verification exercise. 
                                                                     
Operators Opinion
Meanwhile, Mrs. Ifeoma Ana, managing director, Elim Microfinance Bank said the CBN should have done the verification in the first instance before announcing the revocation.
She described the action of the CBN as incompetent and a mark of inefficiency on the part of the regulatory authority, stating the damage that has been done is unquantifiable.  In her words, “Why can’t they verify before the revocation and now they come out to tell the whole world that there was mistake. It shows incompetence especially at that point when the confidence level has depreciated,” she said. She said that such act by the apex bank is condemnable considering the fact that even if some of those banks reopen in the long run, their image had already been battered and that it may lead to huge withdrawals, which will affect the liquidity of such institutions.  ‘This is a show of shame and it is better the federal government intervene before the issue gets out of hand,” she remarked. Ana indicated that the revocation has ruined the confidence level, while investors are already pulling out, stating that this is a negative signal to the development of the young microfinance industry. 
On the contrary, Mr. Godwin Ehigiamusoe, managing director, Lapo Microfinance Bank while speaking to BusinessWorld said the fact that the apex bank issued new licences to about 121 MFBs is a courageous step.  ‘The fact that they admitted that there were mistakes is encouraging. And now, they are giving licences to some of them. I think this is good because if they stand by their action, nobody could challenge the apex bank.” He believes every step made by the CBN was meant to develop the sub sector and that it cannot do anything that will hamper the growth of the system. “It is the regulator and it has every right to carry out such action, but of course, such development would have both positive and negative effect, he said.” Mr. Rogers Nwoke, chairman, National Association of Microfinance Banks (Namb), Abuja chapter, on his part said  though the revocation saga worsened confidence crisis in the industry, he noted that in the long run, microfinance market could return back to profitability.
He added that the association had earlier dialogue with the CBN over the matter and the issuance of new licences to 121 MFBs is the product of the dialogue. For me, CBN should be credited to have listened to the plea of operators and issued new licences to some of the affected ones, he said.

The Way Forward
Mr. Lanre Abiola, managing director, Gold Microfinance Bank in his part said though the CBN’s action was meant to boost confidence, it will take time before it would materialise.
“The gain cannot be immediate. It is going to take time before the industry can reap its benefit. Therefore, CBN and NDIC should ensure that people are not unnecessarily delayed and suffered to access their money in the affected MFBs,” he indicated.
However, finance experts are of the view that the regulatory capacities of the CBN should be strengthened so that this situation does not repeat itself. To them, if CBN has been doing it’s monitoring well, such abnormalities in banks would have been known even before it affects the whole industry.
And as a matter of fact, operators who spoke to BusinessWorld said it is regrettable that a body like a central bank can make such a big error, saying if it were to be in advanced countries, they could have paid damages to the banks affected.
“If it were to be in a country where everything works, CBN would have been ordered to pay compensation to the 121 MFBs, because whether we like it or not, the image and credibility of those banks have been battered,” an operator said on anonymity.