Abolo to CBN: Focus More on Corporate Governance, Not Recapitalisation

**Says Standard of Corporate Governance in MfBanks Poor

By Adedapo Adesanya

The Central Bank of Nigeria (CBN) has been advised to consider paying more attention to standard of corporate governance at microfinance banks in the country than recapitalisation of the sector.

An expert in the banking industry, Dr Emmanuel Moore Abolo of the Risk Management Academy Limited, who gave this suggestion, said operating sound corporate governance for the banks and enforcing stringent compliance regime will go a long way in ensuring a standard environment for operation by microfinance banks in Nigeria.

Speaking at a seminar in Lagos on Thursday, Dr Abolo emphasised that the present standard of corporate governance in microfinance banks in Nigeria was poor.

“The standard of corporate governance in many microfinance banks in Nigeria is poor. Board members are known to misuse their positions to obtain facilities way above the regulatory limit for insider related loans and worse still with no intentions of repaying such facilities,” he noted.

Dr Abolo was a guest speaker at the forum organised by a top international investment banking firm, GTI Capital Limited, in conjunction with one of Nigeria’s business-oriented media platform, Business A.M. The joint finance and investment dialogue was on the recapitalization of microfinance banks in Nigeria.

Apart from Dr Abolo, others at the seminar were the Group Managing Director of GTI Capital Limited, Mr Abubakar Lawal; Chief Economist & Head, Corporate Transformation of GTI Capital Limited, Professor Martin Ike-Muonso amongst others.

During the lecture tagged: “Recapitalisation of Microfinance Banks: The Risks, The Opportunities”, Dr Abolo presented the pros and cons associated with the CBN’s recapitalisation scheme for all microfinance banks at unit, state, and national levels.

He said while recapitalisation might not be the effective answer to the multitude of problems encountered by microfinance banks, operating sound corporate governance for the banks and enforcing stringent compliance regime would go a long way in ensuring a standard environment for operation by microfinance banks in Nigeria.

He stressed that recapitalisation presents a lot of benefits and might prove crucial to the survival of some microfinance banks in the country., saying, “The emergence and prevalence of miracle or magic banks from time to time has done a lot of disservice to the image of microfinance banks.”

According to the chief speaker, microfinance institutions are plagued with copying, competing, and mimicking the practices of commercial banks while they are restricted by weak regulatory support and outdated technological support.

He identified that inadequate capital, poor service delivery, unfavourable and frequent changes in government policies associated with high risks and corruption prevent microfinance banks from performing at optimal level.

Dr. Abolo, from his wealth of experience in the finance world, suggested that there might be need for transformation of microfinance institutions into deposit-taking financial institutions.

“Transform microfinance providers into fully regulated deposit-taking financial institutions. These transformations have successfully taken place in Bolivia, Kenya, Uganda, Mongolia, Peru, and several other countries,” he said.

Dr. Abolo also called for the structuring of robust risk management architecture which will help cushion many microfinance banks against unexpected losses and systemic risks.