Many insolvent MFBs must surely close shops before recapitalization deadline – NAMB President

Mallamm Yusuf Ahmed Gyallesu

The President of National Association of Micro Finance Banks (NAMB), Mallam Yusuf Ahmed Gyallesu has confirmed that some micro finance banks must close shops to avoid the bad image they been giving to the sector. He made the disclosure in an interview with news men in Abuja. Excerpts;

May we know you officially, sir.

I am Mallam Yusuf Ahmed Gyallesu, the President of National Association of Micro Finance Banks of Nigeria.

What have you done to save your members from going out of business in the face of the new recapitalization policy of Central Bank of Nigeria?

What we have done and still doing is advocating to our members to ensure they try to meet the first threshold, which expired on 31/4/2021. A few days to the expiration of the first threshold, our issue was tabled before the House of Representative and they made a plea to CBN to suspend for the time being the recapitalization exercise deadline until the economy improves.

However, the decision is persuasive to CBN. They only asked them to suspend it because there is a lot chaos caused in the sector because of that policy drive.

It was reprieve for us because a lot of our members who thought that at the end of April 2021, they will be out of business; Because they have not met the demand of CBN, time is bought for them. We are still pushing and advocating with CBN to reason with what the House of Rep said.

So, we are not relenting our efforts. For us it is even good and it is necessary to boost our capital base because that will allow you more opportunity, more force to do business.

So, we are sensitizing our members, let them continue as if the deadline has not been removed. Let them see how much they will inject as capital to their business. I know at the end of the day CBN will definitely agree to what the National Assembly has persuaded them to do. And we hope that will happen. But at the end of the day, even if without increasing the share capital, we know some of our members are technically insolvent. Even without CBN coming, they will on their own close shop, that is why we are doing house cleansing.

We are going round the country trying to identify such banks we know that are technically insolvent and see if there is anything we can do for them.

Those we can assist- (we link them up with other investors), we do. Those we know their case is hopeless we allow them to die naturally, because such types are the ones that are brining bad image and bad name to the sector itself. So that is where we are now.

How much can a failed MFB be sold?

Well when you fail it means CBN has retrieved your license.

When a bank is technically insolvent it means the share capital, they have to do their business, they have exhausted them. You have used it in giving loans, in paying salaries, in buying assets and other things. Money is no more there to the extent that customers that have deposited money with you, you have eaten up into that. That means you are technically insolvent.

At that point you cannot continue to do business. So, the right thing for you to do is, go to CBN and write; you have given me license to do XYZ, I am no longer in the position to do it. The capital that I injected is completely gone because of so, so reasons; down turn in the economy, Corona-Virus and so many factors that will make one insolvent. We cannot do it, please take your license.

That means you are dead. CBN will collect your license, that is they will announce your death and NDIC will come and do your burial.

They will look at those depositors that have funds with you, so that you cannot sink with other people’s money. Your capital is gone, it is gone but deposits of customers with you, NDIC will come to get the list of all the depositors that have funds with you. There is an amount they stipulate; for an individual up to the maximum of two hundred thousand naira. Assuming you have one million naira with the bank NDIC will check the account of the sinking band and pay you a maximum two hundred thousand naira, meaning they are reducing your loss.

The risk NDIC insures for a depositor’s money is two hundred thousand naira for individual and five hundred thousand naira for company, irrespective of how much you have with that bank.

So, if you are lucky and it is only one hundred and fifty thousand naira you have with the bank, it means you are getting all your money from NDIC because your insurance is up to two hundred thousand naira. And those that have more than the maximum they will surely loose what is above the maximum.

So once that one is done it means you are gone and nothing can be done. But where you are having issue, you are finding it difficult to pay your depositors, when they come to withdraw you tell them come tomorrow, that means you don’t have funds. At that point, you can reach out to people and say please this business I set out to do, from what I am seeing I cannot do it. I don’t want the license to go like that. If you are interested come and buy off the business.

Once they buy the business there will be change of ownership and that business continues. So, it is at the option of the new investor to retain the name or change it. They are procedure to follow at the CBN. And CBN encourages that, once there is a failure of the bank it has terrible ripple effect on the economy.

The factors that determine how much you sell, when we sit on the table you list your assets and liabilities as at the time of negotiation. It is then the two parties will arrive at a suitable amount to sell the bank. 

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