CRISIS of confidence is now rocking licensed microfinance Banks (MFBs) operating in Nigeria. The crisis of confidence followed massive withdrawals by depositors, a situation occasioned by the recent withdrawal of licenses of over 224 MFBs.
Depositors are now making frantic moves to withdraw their deposits from the banks as efforts being made by the management of the banks have not achieved the desired results. The Nigerian apex bank had recently withdrawn the licences of some MFBs, saying the closed banks were “terminally distressed and technically insolvent, or had closed shop for at least six months.”
CBN further said that “a significant number of the MFBs were deficient in their understanding of the microfinance concept and the methodology for delivery of microfinance services to the target groups.” The apex bank stated that “many of them lost focus and began to compete with deposit money banks for customers and deposits, leaving their target market unattended, in spite of efforts of the regulatory authorities to put them back on track.”
In an apparent move to calm the situation, apex bank a fortnight ago, granted provisional approval for new licences to 121 out of the 224 microfinance Banks (MFBs), whose licences were recently withdrawn. The approval for the provisional licenses is however subject to the fulfilment of some specific requirements within the 90 days.  The move by the apex bank may not be unconnected with the torrents of criticisms that greeted its recent withdrawal of licenses of 224 MFBs. Analysts believe that the action of CBN may be a face saving measure as some of the MFBs were said to be in top shape before the sudden hammer of the apex bank.
The apex bank said the provisional approvals were given to those that had made fresh injection of capital and made significant loan recovery, as confirmed by a recent capital verification exercise. The requirements for the grant of new operating licence to the 121 MFBs include the capitalization of prior deposits for shares and the new capital injection to bring the shareholders’ fund unimpaired by losses to the prescribed minimum of N20 million, good corporate governance, sound risk management system and strong internal controls to forestall avoidable losses, closure of unapproved branches, cash centres and customer meeting points, adoption of a true microfinance model, among others.