It is my pleasure to be with you at this year’s Workshop which is the eighth in the series organized by the Nigeria deposit Insurance Corporation (NDIC) for members of the Financial Correspondents Association of Nigeria (FICAN) and their Business Editors. The workshop is an assurance of the fact that the NDIC remains resolutely committed to the goal of further enriching and enhancing the capacity of financial reporters to enable them adequately cope with the ever increasing challenges of their profession.
The objectives of this year’s workshop, which include – assisting participants in understanding, analyzing and reporting legal and technical issues involved in the activities of the Corporation; and sharing with the participants the complementary role of NDIC in promoting financial inclusion in Nigeria, among others – are considered apt in view of the peculiar role of the NDIC in contributing to banking system stability. Distinguished audience, one way in which successive administrations in Nigeria had responded to the need for enhancing the participation of rural dwellers as well as economically active poor members of the society in economic activities over the years, was the creation of micro credit schemes. The most recent addition to the stream of measures aimed at enhancing economic inclusion was the microfinance policy which was launched in December 2005. The micro-finance framework provided for the establishment of micro-finance banks (MFBs) which are to serve as vehicle for providing financial services to the economically active poor in the society.
Following the licensing of the MFBs in Nigeria, deposit insurance coverage had to be extended to these institutions in 2006. It is instructive to note that the initial coverage level, fixed at N100,000 in 2006, was increased to N200,000 in 2010 so as to sustain depositors’ confidence in the sub-sector. Furthermore, in view of the relative newness of this action, the NDIC used all available opportunities to sensitize licensed MFBs on the system.
Other initiatives taken by the NDIC to enhance public awareness about DIS in respect of microfinance banks include:
Development of a new robust and interactive Website: www.ndic.org.ng
Production of various hand-bills on the mandate, operation, achievements and challenges facing NDIC and translation into 3 major local languages as well as circulation of same to various stakeholders.
Development of Help-Desk facility to enhance communication between NDIC and its stakeholders especially depositors, as well as to provide an effective grievance redress mechanism.
Pasting of enlarged NDIC decal (logo) on entrances of bank head offices and branches for easy visibility.
All those efforts were geared towards increasing public awareness of deposit insurance system and to facilitate public understanding of NDIC’s role and contribution within the nation’s financial system.
It would be recalled that one of the objectives of microfinance banking in Nigeria is to increase access to credit among local entrepreneurs who do not have the required collaterals to obtain loans in the deposit money banks (DMBs). However, many MFBs in Nigeria have not been able to perform their expected roles effectively. Many of the MFBs have been found wanting in their responsibilities to their depositors. The microfinance industry has been confronted with numerous challenges since the launch of the Microfinance Policy Framework in December 2005. Basically, the problem with many of the MFBs could be traced to poor corporate governance. The key problem had been with the conception and operation of many of the MFBs in the system. In fact, a significant number of the MFBs have been observed to be deficient in their understanding of the microfinance concept and the methodology for delivery microfinance services to the target groups.
Following numerous petitions from depositors complaining about their inability to access their funds in some MFBs and other reports indicating that some MFBs had closed their doors, both the Central Bank of Nigeria (CBN) and NDIC embarked on target examination of all the licensed MFBs in Nigeria early in 2010. The examination revealed that 224 of the MFBs were terminally distressed or technically insolvent, while many of them had closed shop for six months or more.
Based on the foregoing revelation, the CBN, in September, 2010, revoked the operating licenses of 103 microfinance banks while provisional licences were issued to 121 that were able to recapitalize. For the closed MFBs, the NDIC had compiled all the necessary information for 80 out of the 103 and payment of their insured deposits commenced on December 6, 2010. The NDIC is working tirelessly to get the information of the remaining 23 MFBs and payment will soon follow. As usual, the exercise has received a lot of publicity and NDIC will continue to continuously inform the affected depositors so as to facilitate reimbursement of their trapped deposits.
Going forward, the NDIC and the CBN are committed to strengthening the MFBs in the country to facilitate the achievement of the objectives for which they were set up by strengthening regulation and supervision as well as by providing necessary incentive to encourage self-regulation through the instrumentality of National Association of Microfinance Banks in Nigeria. The NDIC, in particular, will continue to carry out its on-site and off-site supervisory activities of insured institutions with great care. The on-site examination and off-site surveillance of the financial institutions in the past, had helped in no small measure in promoting safe and sound practices in the sub-sector, thereby averting the collapse of the micro-finance initiative.
In the same vein, the NDIC has embarked on some proactive measures to extend deposit insurance to non-interest (Islamic) banks due to be introduced in the country. As part of preparations by the NDIC for the extension of deposit insurance to these specialized banks, NDIC Board members and some staff paid a visit to Malaysia Deposit Insurance Corporation (MDIC), which has a very rich experience in Deposit Insurance for Islamic banking products. A visit was also paid to Bank Negara Malaysia, the apex banking institution in charge of the development and supervision of Islamic Banks in Malaysia. Based on the experience gained during the visit, the NDIC had developed a draft Framework that would enable it extend DIS to non-interest/non-profit financial institutions that would be licensed in due course by the CBN. A sensitization workshop on Non-Interest (Islamic) Deposit Insurance Scheme (NIDIS) aimed at exposing stakeholders to the features of non-interest (Islamic) DIS had also been mounted.
Ladies and gentlemen, the issues to be addressed in this workshop by the various resource persons and our honourable selves, attest to the timeliness of the workshop. Together with other stakeholders like you, we shall continue to be proactive and react to new challenges in the banking sector and regulatory environment as they unfold. As a safety net player in the international financial system, the NDIC will continue to collaborate with the CBN and other stakeholders in ensuring the safety and soundness of the nation’s banking system.
Finally, as we look forward to stimulating deliberations at this workshop, I urge all participants and resource persons to give their best in addressing the various topics listed for consideration. The success of this workshop will, no doubt, depend on the constructive contributions of all. It is my sincere hope that you will find your stay with us worthwhile and enjoyable.
Thank you for your kind attention.
December 10, 2010