Dear Microfinance Practitioners,
Predictions/Expectations for the Banking Subsector 2020 – Microfinance.
Now that it appears the Central Bank of Nigeria (CBN) wants the microfinance banks to wake up or experience a little shake off, we have taken some time to write to the practitioners on the positives and negatives the year 2020 brings. Check the points and rate your strategic plans:
- We expect a more vibrant microfinance banking subsector in relation to the recapitalization plan by the CBN.
- As a result of (1) above, we expect quality business combinations especially in terms of mergers and acquisitions. If only the ‘ogas’ will accept to relinquish power and stakes.
- Better external funding, partnerships by government agencies, foreign agencies etc as a result of the solidity and trust in the banking sub sector.
- Better remuneration and welfare for staff of the sub sector unlike previous years. MFBs are also going to be able to engage the services of more experienced, and qualified personnel as a result of the expected capacity boost
- To increase depth and breadth, we expect Microfinance banks to embrace technological innovations, build business on technology driven models for sustainable growth.
- We expect Microfinance Banks to put more into customer service as customer satisfaction will be key determinant for business sustenance in the year 2020 and beyond.
However, we expect some negative happenings arising from the tightened monetary and fiscal policies of the government:
- We expect that some Microfinance Banks will fold up for their inability to meet up with the minimum capital requirement.
- Lending is a major earner for the Microfinance Banks, but with the CBN increasing loans/deposit ratio, for Commercial banks, the MFBs will be further constrained to compete with the big banks in the area of lending.
- As a result of (2) above, earnings for most MFBs will drop in the year under review.
- More on earnings, competition in the Microfinance Banking sub sector is increasing and stiffer competition is expected in 2020, this means war. It is going to be a game anchored on survival of the fittest.
- A tougher war has already commenced with Agency banking. The commercial banks have strengthened agency banking products and have commissioned more agents in the past 6 months than they have achieved in the past 2 years.
- A high labour turnover is expected as banks capacity to pay will increase. It will become a battle of who can keep who. Let’s just say, some good hands will say good bye to MFBs that remain refuse to scale up.
Remember, the first half of the recapitalization plan takes effect April 2020 and in another one year April 2021, the final deadline will be completed. With almost 1,000 MFBs as at today, we expect the numbers to reduce to about 200 – 500 after the exercise.
Let me wish all stakeholders, practitioners, players and regulators a smooth ride in the year 2020.
Your Policies spotter,
PS: Kenneth ENORUWA is an advocate of good governance, quality institutions, organizational transformation and excellence in leadership. He is a financial & Management Consultant with vast experience in Banking, Risk, Internal Auditing & Customer Service Experience.