Inability of some microfinance banks to meet the new capital requirements of the Central Bank of Nigeria before its recapitalisation deadline may lead to a decline in the number of MfBs in the country by 400.
Agusto & Co. stated this in a report titled ‘The COVID-19 pandemic-induced accelerated digital transformation may have a limited impact in the microfinance industry in Nigeria – Agusto & Co’.
“The two phased increase in the minimum capital requirements for all categories of microfinance banks to take effect in April 2021 and April 2022 is expected to lead to a reduction in the number of operators from more than 900 to around 500 through consolidation activities as well as failures to meet the new requirements,” it stated.
Agusto & Co. expected the microfinance industry to fare better in 2021 supported by the global roll-out of COVID-19 vaccines, accelerated digital transformation of microfinance banks and businesses in general, renewed focus on essential sectors and government support for MSME businesses.
The Industry, however, continued to have a high level of susceptibility to macroeconomic challenges as was witnessed in 2020, it stated.
According to the report, many microfinance banks in Nigeria, like in most developing countries with relatively low penetration of e-channels, witnessed a doubling of obligations that were past due for up to 30 days during the first wave of the pandemic and lockdown restrictions in early 2020.
Despite up to N5bn spent by the major national and state microfinance banks in Nigeria on the implementation of Internet, mobile and USSD banking services, it stated, the sector remained heavily reliant on brick-and-mortar branches for the acquisition of customers and disbursement of loans and the collection of notes and coins for repayment.