States May Lose Loans in Microfinance Banks
- By Saka Khaliq
- Published January 17th, 2011
- News
- Unrated
There are strong indications that state governments which disbursed their micro credit through some liquidated microfinance banks may forfeit them or may have to wait for a longer time before they could retrieve their money through the Nigerian Deposit Insurance Corporation(NDIC).
Lagos, Oyo, Edo, Osun, Ekiti, Ondo, Delta, among other states of the federation have launched micro credit schemes in their different states. The scheme is meant to eradicate poverty in the grass root by providing financial assistance to the active poor. However, these state governments partnered some microfinance banks to disburse such loans. In the wake of the recent revocation exercise where about 103 microfinance bank licences were withdrawn. BusinessWorld investigation shows that Lagos State government had about N50 million loans in liquidated MIC MFB and N500 million in the defunct Integrated Microfinance Bank(IMFB) while Osun State government had about N19 million in the branch of IMFB in Osogbo, the state capital.
More than 16 State governments have launched microfinance scheme in their respective states partnering different MFBs of which some of them are now in liquidation. NDIC officials noted that such debts are the last to be settled when ever there is bank failure. Speaking to BusinessWorld in a telephone interview last week, Mr Hardy Bichi, NDIC’s spokesperson, said NDIC will pay such loans, but that would only happen after depositors and shareholders of the banks must have been settled.
“What we do is to sell all the assets of liquidated banks. From these proceeds, we will first of all settle depositors and later the shareholders of the banks. If at the end of the day, there is still more money, then we will pay debts including the loans granted to the banks.” he said. He promised that the corporation will pay all insured deposits of the liquidated banks. However, there are indications that even if assets of some of the closed banks are sold, it would not be enough to pay even the shareholders, and as a result, settlement of debts might be a mere possibility.
Industry sources disclosed that assets of the closed banks such as cars, generators, and other fittings have lost their original price value, and as such, could not command respectable price in the market. Only buildings were said to command good price, although, some of them used rented apartments, hence, have little assets to sell for cash. Even, if the proceed could still be enough to settle such debt, experts say experiences have shown that it would take time before creditors are paid.
Lagos, Oyo, Edo, Osun, Ekiti, Ondo, Delta, among other states of the federation have launched micro credit schemes in their different states. The scheme is meant to eradicate poverty in the grass root by providing financial assistance to the active poor. However, these state governments partnered some microfinance banks to disburse such loans. In the wake of the recent revocation exercise where about 103 microfinance bank licences were withdrawn. BusinessWorld investigation shows that Lagos State government had about N50 million loans in liquidated MIC MFB and N500 million in the defunct Integrated Microfinance Bank(IMFB) while Osun State government had about N19 million in the branch of IMFB in Osogbo, the state capital.
More than 16 State governments have launched microfinance scheme in their respective states partnering different MFBs of which some of them are now in liquidation. NDIC officials noted that such debts are the last to be settled when ever there is bank failure. Speaking to BusinessWorld in a telephone interview last week, Mr Hardy Bichi, NDIC’s spokesperson, said NDIC will pay such loans, but that would only happen after depositors and shareholders of the banks must have been settled.
“What we do is to sell all the assets of liquidated banks. From these proceeds, we will first of all settle depositors and later the shareholders of the banks. If at the end of the day, there is still more money, then we will pay debts including the loans granted to the banks.” he said. He promised that the corporation will pay all insured deposits of the liquidated banks. However, there are indications that even if assets of some of the closed banks are sold, it would not be enough to pay even the shareholders, and as a result, settlement of debts might be a mere possibility.
Industry sources disclosed that assets of the closed banks such as cars, generators, and other fittings have lost their original price value, and as such, could not command respectable price in the market. Only buildings were said to command good price, although, some of them used rented apartments, hence, have little assets to sell for cash. Even, if the proceed could still be enough to settle such debt, experts say experiences have shown that it would take time before creditors are paid.
