The Central Bank of Nigeria (CBN) and the International Finance Corporation (IFC), have urged Microfinance Banks (MFBs) to embrace self-regulation and consolidation so as to enhance performance and sustainability of the sector.
CBN Deputy Governor, Financial Sector Surveillance, Mrs Aisha Ahmad, who gave the option at the fifth Annual Symposium of the Nigeria Microfinance Platform, which held in Ibadan with the theme: Self Regulation for Sustainability and Development of the Microfinance sector, said a comprehensive oversight mechanism was required for effective supervision of microfinance activities of over 900 licensed MFBs.
Represented by Other Financial Institutions Supervision Department (OFISDs) Director, Mrs. Tokunbo Martins, she said the apex bank was of the view that effectiveness of self-regulation in driving performance of the microfinance sector depends on an effective and efficient mechanism for addressing non-compliance, standardised performance measures driven by the best performing operators in the microfinance sector.
She said it was important that the umbrella association set the tone right from the onset and clearly communicate their expectations “which should be congruent with the regulators’ expectations for the microfinance industry”.
Also, IFC Country Director, Eme Essien, said while self regulation is important, it will not happen immediately, but gradually as operators and regulators work together. He added that beside self regulation, there is need for consolidation in the MfB sector, as most MfBs are small and their viability remains fragile.
She said: “There must be pursuit of consolidation in the sector. We hope that the smaller banks will look for partnership with other larger ones. You can join forces, grow your network, expand your offerings in that way, and as well grow the credibility of the sector and build trust among customers.”
This, she said, will reduce the pressure on the CBN, but will lead to a high level of sustainability in the sector “so that the microfinance sector really has its place in driving financial inclusion in Nigeria”.
National Association of Microfinance Banks President, Rogers Nwoke, said self regulation is one of the cardinal objectives of the association, adding that it will eliminate the regulator-anxiety of the operator and enhance compliance.