THE NIGERIAN MICROFINANCE POLICY, REGULATORY AND SUPERVISORY FRAMEWORK: THE CHALLENGES AND LESSONS LEARNT. PRESENTED AT THE 5 TH AFRACA CONFERENCE ON MICROFINANCE HOLDING IN BENIN REPUBLIC FROM JULY 2 ND - 4 TH 2008. BY JOE ALEGIEUNO THE DEVELOPMENT FINANCE DEPARTMENT, CENTRAL BANK OF NIGERIA, ABUJA.
TO BE ONE OF THE MOST EFFICIENT AND EFF ECTIVE AMONG THE WORLD’S CENTRAL BANKS IN PROMOTING AND SUSTAINING ECONOMIC DEVELOPMENT.
TO BE PROACTIVE IN PROVIDING A STABLE FRAMEWORK FOR THE ECONOMIC DEVELOPMENT OF NIGERIA THROUGH THE EFFECTIVE, EFFICIENT AND TRANSPARENT IMPLEMENTATION OF MONETARY AND EXCHANGE RATE POLICY AND MANAGEMENT OF THE FINANCIAL SECTOR."
The purpose of this paper is to present the situation report since launch of the policy (2005) , challenges and opportunities offered by the microfinance sector with a view to fostering collaborative interventions that would support building of long-term sustainable microfinance services delivery in Nigeria
In Nigeria, over 80 million people (65% of the active population) remain underserved or unserved by the formal financial institutions.
Microfinance institutions in Nigeria have not been able to adequately address the gap in terms of credit, savings and other financial services required by the microentrepreneurs. Although there were past supply-led interventions that were not successful.
To address the situation and provide sustainable finance services to micro entrepreneurs, the Microfinance Policy, Regulatory and Supervisory Framework was launched on December 15, 2005 by the President of the Federal Republic of Nigeria and Commander-In-Chief of the Armed Forces, Chief Olusegun Obasanjo (GCFR).
Provides for the setting up of private sector driven microfinance banks (MFBs) to provide financial services for active poor and low income households.
individuals, group of individuals, community development associations, private corporate entities, and foreign investors .
Universal Banks currently engaged in microfinance services, either as an activity or product and do not wish to set up a subsidiary MFB, shall be required to set up departments/units for such activities.
Non-Governmental Organization-Microfinance Institutions (NGOs-MFIs) can incorporate subsidiary MFBs while still carrying on their NGO operations or fully transform into licensed MFBs.
607 out of 761 Community Banks have successfully converted to MFBs
In addition to the 607 community banks that converted to MFBs , a total of 72 new investors in the microfinance sub-sector have been granted final licences, while 89 have been granted approval-in-principles as at 30 th May, 2008. Thus bringing the total number of approved MFBs to 768, some of the MFBs have foreign interest of various degrees
The Bank has been aggressively sensitizing the Deposit money banks to downscale to provide financial services to micro entrepreneurs
5 Deposit Money Banks are currently promoting State Microfinance banks
8 NGO-MFIs are being assisted to transform to MFBs.
About 130 regulators and supervisors of MFBs were trained in 2007and 2008 respectively
Through collaboration with Development Partners about 450 MFBs operators were trained on basic operation principles of microfinance banking in 2007 and the Management of the CBN had approved an interim capacity building programme for about 2,864 staff of MFBs in the year 2008
Hosting of international microfinance /micro entrepreneurship award on annual basis.
The Microfinance policy provides for setting up of support institutions towards the realization of the policy targets and objectives : To this end,
National Micro Finance Policy Consultative Committee has been set up to give direction for the implementation and monitoring of this policy.
To further enhance the flow of funds, particularly to micro entrepreneurs, N50bn Micro-Credit Fund was successfully launched in Feb, 2008 by the President of the Federal Republic of Nigeria and Commander-In-Chief of the Armed Forces, Alhaji Umaru Musa Yar Adua (GCFR ).
Certification programme for the management of MFBs has been approved and its implementation strategy is at an advanced stage.
Establishment of Entrepreneurship Development Centers (EDCs) in six geo-political zones of the country to compliment efforts of other relevant agencies in the development of entrepreneurship spirit amongst Nigerians, especially the youths; The pilot phase had commenced in (3) centers; Onitsha, Kano and Lagos
Nigeria Deposit Insurance Corporation (NDIC) has taken the responsibility to insure deposits of microfinance banks (MFBs).
Where we are Contd ORGANIC GROWTH PATH FOR MFBS
To address the skewedness in the provision of financial services, the policy framework promotes an even spread of microfinance banks’ branches and activities, to serve the un-served but economically active clients in the rural and peri- urban areas.
To this end, a unit or state bank is expected to grow its branches in a systematic fashion that enables it to evenly cover the local government or state in which it establishes before moving across geographic boundaries .
Continuous advocacy and enlightenment campaigns to create awareness amongst the stake holders
Continuous training to build capacity of operators and regulators in the sub-sector
Need to up-scale skills, technology and infrastructure in the sector to compete with international global players in microfinance
Initiate processes of establishing a Comprehensive data base on the activities of microfinance institutions
Finalize the process on establishing functional support institutions to enhance acquisition of relevant skills as well as sources of sustainable funding -Certification Programme, Credit Bureau and Rating Agencies
There exists huge untapped potentials for financial intermediation at the micro and rural levels of the Nigerian economy.
The prospects of having a robust microfinance industry is bright as the CBN is equally re-engineering its internal process and machineries to respond to supervisory challenges and provide appropriate regulations to drive the sub-sector .
The microfinance policy offers a tremendous scope for economic growth, poverty reduction and employment generation on a sustainable basis.
Thus it beholds on the Bank to pursue the policy obligation vigorously in order to achieve the set targets and objectives.