August 25, 2009

The recent upheaval in the financial sector is generating apprehension in the micro-finance sub-sector of the industry and the reason is not far-fetched. Recent examination conducted by the CBN to ascertain the extent of microfinance banks (MFBs) compliance to ensure greater focus on core microfinance business, revealed that most of them generally have poor asset quality and weak corporate governance, even though on the average, they seem well capitalized above the prescribed minimum level of N20 million.

The CBN has asserted that most microfinance banks have poor asset quality, with average non-performing loan at 40 per cent and Performance at Risk at 45 per cent as against the 25 per cent prescribed for MFBs. The fear is that should the CBN decides to visit them the way is visiting the banking sector at the moment, many could be thrown out.