DEVELOPMENTS IN THE NIGERIAN MICROFINANCE SUB-SECTOR “POLICY AND PROMOTIONAL PERSPECTIVES”

1. CENTRAL BANK OFNIGERIA DEVELOPMENTS IN THE NIGERIAN MICROFINANCE SUB-SECTOR“POLICY AND PROMOTIONAL PERSPECTIVES” BY MR. JOE ALEGIEUNO  DIRECTOR, DEVELOPMENT FINANCE DEPARTMENT CENTRAL BANK OFNIGERIA

2. OUTLINE OF PRESENTATION • Introduction • Strategies Put in Place to Implement the microfinance Policy • Achievements • Challenges in the Microfinance Sub-sector • Future Perspectives • Conclusion Development Finance Department - CBN, ABUJA

3. 1. INTRODUCTION • The Microfinance Policy, Regulatory and Supervisory Framework for Nigeria was launched in December, 2005. • Prior to the Policy, 35% of the economically active population had access to financial services and hence 65% were excluded from formal financial services • This 65% were often served by the informal financial sector such as NGO-MFIs, money lenders, friends, relatives and credit unions. • The microfinance policy was put in place to elicit the participation of stakeholders in microfinancing and address the access challenge Development Finance Department - CBN, ABUJA

4. INTRODUCTION CONT………. The policy major targets were to: • cover the majority of the poor but economically active population by 2020; • increase the share of micro credit as percentage of total credit to the economy from 0.9% in 2005 to 20% in 2020; and the share of micro credit as a percentage of GDP from 0.2 percent in 2005 to at least 5 percent in 2020. • promote the participation of at least two-thirds of state and local governments in micro credit financing by 2015 amongst others. Development Finance Department - CBN, ABUJA

5. INTRODUCTION CONT………. • The CBN is the central agency responsible for the implementation of the policy in collaboration with other stakeholders • This paper attempts to summarize the role the CBN, particularly the Development Finance Department has played in implementing the policy, and in developing and promoting the microfinance Sub-Sector. Development Finance Department - CBN, ABUJA

6. 2. STRATEGIES PUT IN PLACE TO IMPLEMENT THE MICROFINANCE POLICY • Establishment of the Microfinance Advisory Board (MAB) in 2005 to coordinate and harmonize stakeholder interventions in the microfinance sub-sector. • Establishment of the National Microfinance Policy Consultative Committee (NMFPCC) in 2006 to provide direction and guidance on the policy implementation. Development Finance Department - CBN, ABUJA

7. 2. STRATEGIES PUT IN PLACE TO IMPLEMENT THEMICROFINANCE POLICY • Establishment of an Inter-Agency Technical Committee on the Implementation of the Microfinance Policy to address technical and conceptual issues/programmes related to the policy implementation • Establishment of the Entrepreneurship Development Centres in three geo-political zones (Lagos, Onitsha and Kano) on pilot basis in 2008 to build the capacity and enhance the quality of potential clients of MFBs. Development Finance Department - CBN, ABUJA

8. STRATEGIES PUT IN PLACE TO IMPLEMENT THEMICROFINANCE POLICY Cont------ • Sensitization and awareness campaigns to various stakeholders : • Investors to encourage them set up microfinance institutions, banks, Credit Bureaux, Rating Agencies. Development Finance Department - CBN, ABUJA

9. STRATEGIES PUT IN PLACE TO IMPLEMENT THEMICROFINANCE POLICY Cont------ • Sensitization and awareness campaigns to various stakeholders : • Governments to encourage them to participate in the subsector and contribute to its development in the interest of their subjects, as well as educate them on ways of promoting sustainable microfinance programmes Development Finance Department - CBN, ABUJA

10. STRATEGIES PUT IN PLACE TO IMPLEMENT THEMICROFINANCE POLICY Cont------ • Sensitization and awareness campaigns to various stakeholders : • Deposit Money Banks to encourage them to participate in microfinancing by setting up subsidiaries, departments or engaging in wholesale funding activities in favour of microfinance institutions • Clients to enlighten them on the opportunities in the microfinance sub-sector and enable them to access financial services. Development Finance Department - CBN, ABUJA

11. STRATEGIES PUT IN PLACE TO IMPLEMENT THEMICROFINANCE POLICY Cont------ • Sensitization and awareness campaigns to various stakeholders : • Development Partners to encourage their activities in the microfinance sub-sector and ensure they are aligned with the National Financial Sector Policy • Establishment of apex association of MFBs and MFIs Development Finance Department - CBN, ABUJA

12. STRATEGIES PUT IN PLACE TO IMPLEMENT THEMICROFINANCE POLICY Cont------ • Capacity Building for Regulators and institutions • Review of the microfinance policy to address areas such as capital base, organic growth path, single obligor limit and restriction of operations of MFBs, among others. • Baseline survey on the microfinance subsector in collaboration with the UNDP and the Rural Finance Institution Building Programme (RUFIN) in 2010. Development Finance Department - CBN, ABUJA

13. 3. ACHIEVEMENTS • NMFPCC met 12 times to address various policy related issues • MAB met 13 times and made progress in directing and harmonizing development partner activities • EDC trained/counseled 34,741 graduates, created 2,882 jobs and enabled 999 of the graduates to access N171.3 million for their activities • 816 MFBs licenses issued and many NGOs, and cooperative societies now in operation Development Finance Department - CBN, ABUJA

14. 3. ACHIEVEMENTS • Apex Association of MFBs and MFIs already formed and commenced operation • 323,510 NYSC members sensitized on self employment • Trained 528 staff of Unlicensed MFIs in the six-geopolitical zones in • Trained 150 regulators and supervisors (CBN and NDIC staff) in Diploma in Microfinance Development Finance Department - CBN, ABUJA

15. 4. CHALLENGES/SSUES IN THE MICROFINANCE SUB-SECTOR SINCE 2005 • Large number of institutions particularly converted community banks with varied institutional set up, and diverse understanding on the practice of microfinancing • Lack of capacity in practical microfinance banking leading to possible mission drift by the operators • Lack of sustainable source of wholesale funding for on-lending to MFBs and for social development. • Sub optimal existence of support institutions such as rating agencies, credit bureaux and in particular the Microfinance Development Fund. Development Finance Department - CBN, ABUJA

16. 5. FUTURE PERSPECTIVES • Training • Certification programme in collaboration with OFISD • Specialized training programmes in collaboration with development partners on • Leasing • Micro insurance • Microfinance institution development • Social performance management • Policy • Microfinance Development Strategy for Nigeria • Conclusion of baseline survey report on the microfinance subsector • Release of the revised microfinance policy and regulatory guidelines • Institutions • Microfinance Development Fund Development Finance Department - CBN, ABUJA

17. FUTURE PERSPECTIVES CONT…….. • Collaboratin W ith Third Parties • Federal Ministry of Agriculture and Waters Resources to implement the Rural Finance Institution Building Programme • Credit Awareness Nigeria Limited to provide technical support for its initiatives • Alliance for Financial Inclusion Bangkok, Thailand to obtain technical support and assistance for enhanced knowledge and experience sharing with other jurisdictions • Other partners such as GIZ, UNDP, USAID, Ford Foundation, EU, CGAP, SEEP to define and support the development of the sub-sector Development Finance Department - CBN, ABUJA

18. 6. CONCLUSION • The launching of the Microfinance Policy in 2005 has no doubt won the interest of investors, institutions, state governments and development partners in microfinance. • The Bank is taking steps to sanitize the sub-sector with the review of the Microfinance Policy and Regulation, Certification Programme and the Operational Template for MFBs among other interventions. • The CBN in particular will be the fulcrum of strategic steps to ensure that the stakeholders understand their roles and responsibilities as the sub-sector undergoes changes to address the challenges earlier mentioned. Development Finance Department - CBN, ABUJA

19. CONCLUSION Cont……….. • Following the inauguration of the Apex Associations of MFBs and Unlicensed MFIs, it is expected that their activities will complement that of the CBN in the area of self-regulation and capacity building for their members. • Hence, all stakeholders particularly the regulators, supervisors and operators will have to properly play their respective roles to strengthen and position the sub-sector for enhanced financial services delivery. Development Finance Department - CBN, ABUJA

20. THANKS FOR LISTENING For more information, Contact The Director, Development Finance Department Visit our website: www.cenbank.org Development Finance Department - CBN, ABUJA