By AHURAKA ISAH, And SOLOMON AYADO, Abuja
Several stakeholders in the banking and finance sector yesterday insisted that what the microfinance banks (MFBs) need is remodeling of its operations to function effectively, just as they disagreed with the Senate over its proposed amendment of laws on the regulation and supervision of the bank in the country.
The stakeholders, which included the Federal Ministry of Finance; Central Bank of Nigeria, CBN; Nigeria Deposit Insurance Corporation, NDIC; National Association of Microfinance Banks, NAMB and Chartered Institute of Bankers of Nigeria, CIBN, among others, faulted the Senate’s move on the bill during a public hearing by its committee on Banking, Insurance and other Financial Institutions.
The committee organised the public hearing on three bills –a bill for an Act to make provisions for the licensing, regulation and supervision of microfinance business in Nigeria and for related purposes, 2017.
Others are a bill for an Act to amend the Insurance Act to set minimum limit of compensation even in death, injury or loss of property of third parties with respect to insurance of public building and building under construction and for related matters; and a bill for an Act to amend motor vehicle third party insurance Act, 2004 to facilitate the accomplishment of the objectives of compulsory third party insurance and for related matter, 2017.
But the CBN Governor, Mr. Godwin Emefiele represented by the director of Legal Services, Mr. Johnson Akinkunmi argued that the bills were unnecessary “because if the licensing, regulatory and supervision roles which have traditionally been the obligation of CBN is now given to the ministry or NDIC, through the planned amendment, it may cause serious conflict in the nation’s financial system operations”.
Emefiele maintained that the power to licence banks lies with the CBN, adding that no other government agency or ministry was empowered under the law to assume power to supervise banks, determine their licences or being appoint as liquidator.
“The bills attempted to demarcate microfinance banks into two, those that take deposit and those that do not, and hope to be regulated by the Ministry of Finance. This will cause conflict because it is the CBN that has power to regulate banks.
“Another major problem that the bill will cause is that some categories of microfinance banks will be regulated by the Ministry of Finance and some by the CBN. This is unhealthy and very unnecessary. There is no reason to carve out deposit insurance for microfinance aside the NDIC”, he stressed.
The CBN chief, however, identified inadequate capitalization, corporate governance and funding model as some of the major challenges of microfinance banks which he noted had affected its business and operations over the years, especially in the rural communities.
Emefiele therefore charged the senate to look at the challenges with a view to assisting in addressing them rather than the planned amendment, adding that “policy and strategic direction is the legal framework that will make microfinance banks function effectively”.
Minister of Finance, Mrs. Kemi Adeosun, who was represented by the Permanent Secretary in the ministry, Alhaji Mahmud Isa Dutse, agreed with the CBN Governor, saying the ministry was not asking for powers to supervise banks.
In his submission, the managing director/chief executive of NDIC, Alhaji Umaru Ibrahim, said that the corporation was ready and would continue to collaborate with the CBN in strengthening the nation’s financial institutions.
Ibrahim, who was represented by an executive director in the corporation, Mr. Atise Erediuawa agreed that the bill, if passed into law would be a duplication and cause conflict between the CBN and the ministry, saying most of the proposals in the bill are already existing in the statute.
According to him, “the proposal of Protection Funds Board in the bill, though noble, the function of the board already exists in the Act of NDIC. The mandate goes beyond protecting funds by NDIC, but capacity building and provision of guideline in financial intervention have become more imperative”.
He said the primary role of NDIC is to insure all deposits liabilities of licensed banks, adding that the corporation’s major role is to give assistance to insured institutions in the interest of depositors, in case of imminent or actual financial difficulties where suspension of payments is threatened, to avoid damage to public confidence in the banking system among others.
The NDIC boss therefore advised the senate to provide guidance for the ministry, CBN and other relevant bodies for proper model or role for microfinance banks in the country, saying “it is the model that should be addressed rather than reviewing the bills”.