CBN introduces risk management framework

It is expected that safety and sanity will return to microfinance banks (MFBs) in the country with the introduction of risk management framework by the Central Bank of Nigeria (CBN).Earlier this year, Sanusi Lamido Sanusi, the CBN governor, observed that the MFBs were already facing challenges bordering on...

 This, funny enough, underscores the several complaints from operators over non payment of loan borrowed by customers. Uche Ubani, managing director, Peniel Microfinance Bank Limited Lagos, said in a telephone interview that business had not been faring well because customers were not paying back their loans.

In order to reduce the risk exposure of the MFBs in the country, the CBN is now set to introduce risk management supervisory framework to supervise the operators in the industry. The framework, tagged 'A framework for risk supervision of MFBs in Nigeria' is expected to upgrade the risk profile of subscribing institutions, Ubani revealed.

Stating the kind of risk that would be covered by the new invention, he listed them to be credit risk, market risk, liquidity risk, and strategic risks. The framework would mandate microfinance institutions to acquire risk management template for easy supervision by the apex bank.

Olufemi Fabamwo, deputy director, Other Financial Institutions Supervision Department (OFID), CBN, stated that the adoption was to supervise MFBs effectively, such that the safety and sanity of microfinance institutions could be accessed.

Fabamwo, who addressed microfinance operators at the Committee of Microfinance Banks in Nigeria (COMBIN) meeting in Ogba - Lagos last week, said the new invention was to bring to an end the compliance-based supervision currently in use. The compliance-based supervisory model is the one presently in use by the apex bank to supervise microfinance firms across the country, but the new framework is now expected to succeed the former.

The CBN deputy director stated that the former was outdated, hence the need to adopt a new one, advising the adopting institutions to, on their own part, institute risk management system that would help the CBN supervise MFBs effectively. Though, some of the banks already have the risk management templates they use in measuring their level of risk, he advised those who were yet not to do so to brace up for it. This, he noted, is a proactive and dynamic method of supervising MFBs to enable for effective risk management system. 

Click link to read on

Read on