An examination of 406 microfinance banks (MFBs) carried out by the Central Bank of Nigeria (CBN) last year found that 126 of the banks had “high” composite risk ratings.
The apex bank disclosed this in its recently released Financial Stability Report (FSR) for December 2015. According to the report, “during the review period, 406 microfinance banks (MFBs) were examined.
The exercise comprised Risk Based Supervision (RBS) examination of 236 MFBs, spot checks on five others that applied for voluntary winding up, existence checks on 30 institutions that defaulted in rendering returns consecutively over a period of six months and target examination for capital verification of 135 MFBs earlier issued regulatory directive to beef up their capital bases.
Results of the examinations revealed that 27, 83 and 126 MFBs had ‘moderate,’ ‘above average’ and ‘high’ composite risk ratings, respectively.”
The report further stated that MFBs’ total assets increased to N361.04 billion at end-December 2015, from N356.03 billion at end-June 2015, reflecting an increase of 1.41 per cent.
In addition, the sub-sector’s paid-up capital rose by 2.73 per cent to N84.18 billion from N81.94 billion at end- June 2015, while shareholders’ funds decreased by 1.72 per cent to N95.36 billion at end-December 2015, from N97.03 billion, at end-June 2015.
Also, net loans and advances decreased by N10.27 billion to N167.85 billion at end December 2015, compared with N159.40 billion at end-June 2015, while shareholders’ funds, decreased by N1.72 billion to N95.36 billion, at end-December 2015, compared with N97.03 billion at end-June 2015.
Meanwhile, the CBN has reiterated that the peer review sessions for MFBs, which it started last year would hold yearly with enhanced methodology, increased scope and active network among microfinance practitioners.
According to the CBN, the peer review session, which it organised in collaboration with the International Fund for Agricultural Development (IFAD) and Rural Finance Institutions Building Programme (RUFIN), for MFBs mentored by RUFIN, was aimed at enhancing the stability of the microfinance sector. It further stated that the session was also aimed at benchmarking MFBs and developing a network for operators.
The CBN stated: “The forum afforded operators ample exposure to share experiences with their peers and avail them the opportunity to learn from each other, and thereby mitigate the risk of failure likely to arise from making the mistakes of others and encourage replication of success.”