68% microfinance banks at risk as recession takes its toll

Nigeria’s recession may have taken its tolls on Microfinance banks (MFB) as 68 per cent of the 406 licenced MFBs in the country are now exposed to high risk margin in 2016 more than was the case in 2015.

According to the latest Central Bank of Nigeria (CBN) findings on the sub-sector published in the apex bank’s website, compared with the situation last year, MFBs suffered higher risk, poor patronage and low return in investment in 2016.

It classified the categories of the exposure of the banks into various risks, based on findings of 2013 through 2015, with emphasis on 2016 third quarter returns.

As at 2015 performance, microfinance banks recorded above average in terms of risk ratings, but fell below the mark at the end of third quarter of 2016.

The report disclosed that total assets of the banks in 2015 stood at N361.04 billion, while the 2016 quarterly review indicated a loss of 1.5 per cent so far.

At the end of third quarter in 2015, the sub-sector’s collective paid-up capital rose to N84.18 billion from N81.94 billion, while shareholders’ funds decreased by 1.51 per cent to rest at N95.36 billion from N97.03 billion.

But in 2016, apart from the paid-up capital rising by 1.2 per cent, there was a substantial decrease in shareholders’ funds from 95.36 billion to 93.5 billion.

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However, managers of the various microfinance banks in Nigeria have complained of neglect by the authorities.

Mr. Austin Irene, chief executive officer of Devine Microfinance put it thus: “There is yet to be enough attention paid to this sub-sector, by way of government assistance, unlike in the conventional banks.

“For the commercial banks and other sectors, there is AMCON that absolves bad debts from their system, but there is none for the microfinance banks, meaning that if any of us is in a similar situation that the conventional banks find themselves, we are to bear the brunt alone.”

Other operators stated that the present economic downturn has taken away the medium and small business enterprises that form the bulk of their clientele, with many of the benefits of loans taken from the sub-sector by not servicing them.
By Emma Eke….

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