T he Central Bank of Nigeria has said that its recent move to review the micro-finance policy framework in the country, stemmed from the failure of the sub-sector to meet set objectives.
At a recent meeting with managers of the National Poverty Alleviation Programme, Mr. Joe Alegienu, CBN’s director of development banking, disclosed that the apex bank was developing a framework to regulate micro-finance banking in the country.
He said the decision to create a new framework was because micro-finance banking had failed in the fight against poverty as a result of the proliferation of commercial bank operators masquerading as micro-finance operators.
He explained that the new micro-finance banking policy framework is expected to become operational by June this year, adding that the CBN would soon publish an operational template that would serve as a guide on how microfinance banks are going to do business.
Alegienu said, “We do not want a situation where the micro-finance banks that were established to support the fight against poverty among rural people are allowed to turn into a monster that would consume the people.
“We will soon publish an operational template that would serve as a guide on how micro-finance banks are going to do business. It is time to tell those not qualified to do the business to stay away.”
The existing micro-finance policy and framework was launched on December 15, 2005.
The CBN, in the policy, explained that robust economic growth cannot be achieved without putting in place, well-focused programmes to reduce poverty through empowering the people by increasing their access to factors of production, especially credit.
Microfinance is about providing financial services to the poor who are traditionally not served by the conventional financial institutions, it stressed.
In Nigeria, according to the policy, the formal financial system provides services to about 35 percent of the economically-active population, while the remaining 65 percent is excluded from access to financial services.
The 65 percent is often served by the informal financial sector, through nongovernmental organisations – micro-finance institutions, money lenders, friends, relatives and credit unions. The regulation of the activities of some of these institutions will help to promote monetary stability and a sound financial system.
The micro-finance policy was introduced in exercise of the powers conferred on the Central Bank of Nigeria by the provisions of Section 28, sub-section (1) (b) of the CBN Act 24 of 1991 (as amended) and in pursuance of the provisions of Sections 56-60(a) of the Bank and Other Financial Institutions Act 25 of 1991 (as amended).
The policy recognises existing informal institutions and brings them within the supervisory purview of the CBN, thus creating a platform for the regulation and supervision of micro-finance banks through specially crafted regulatory guidelines.
A financial analyst, Mr. Emmanuel Chukwuka, said micro-finance banks seem to have deviated from their core mandate as they now compete with banks, and are now completely detached from the poor which are supposed to benefit from their services.
