Weak capital base hindering MFBs effectiveness- Uwaleke

The Head, Banking and Finance Department, Nasarawa State University, Professor Uche Uwaleke, has asserted that the weak capital base of Micro Finance Banks (MFB) continues to hinder their ability to engage professionals in their operations as well as put proper risk management framework in place.
The reality, according to Prof. Uwaleke is that many of the unit Microfinance banks in particular with a minimum capital base of N20 million are financially sick with very high non performing loans.
“Little wonder many of them are closing shop and their licenses being withdrawn by the CBN,” he said.
The Professor of the market made the observation in a message to Blueprint yesterday in Abuja.
The Head of Department noted that the directive by the CBN to MFBs to recapitalize is a welcomed development as it will boosts their effectiveness and enable them achieve their mandate.
According to him, the development will also enhance their corporate governance.
He insisted that with sufficient capital, the MFBs will be in a stronger position to engage competent staff and invest in the right technology.
He said: “The whole idea behind Microfinance banks is to have institutions that are in a position to grant micro credit to micro and small enterprises. That does not mean that such institutions should be small in size.
As a matter of fact, they should be large and strong enough to perform their financial intermediation roles. In this regard, the directive to Microfinance banks to have their capital shored up by the year 2020 is welcome.
“This CBN directive will no doubt sanitize the Microfinance sector and further stabilize the financial system,” he added.