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Corporation to pay N9.8b to defunct microbanks’ depositors

By on April 21, 2011

Depositors of the 103 failed Micro Finance Banks (MFBs) whose licences were revoked by the Federal Government are to be paid about N9.8 billion by the Nigeria Deposit Insurance Corporation (NDIC).

Beneficiaries numbering 731,000 in 91 out of total affected MFBs nationwide are to receive their monies following the completion of the verification and authentication of their documents by the corporation, which took over the banks for liquidation in the wake of the revocation of the operational licences of 224 “terminally distressed and technically insolvent” MFBs last year by the Central Bank of Nigeria (CBN).

The corporation is charged with the statutory responsibility of providing insurance cover for all money deposit financial institutions in the country. The affected institutions were those with negative shareholders’ funds, negative capital adequacy ratios, and negative liquidity ratios.

Head of the corporation’s communication and public affairs department, Haji Birchi, yesterday, said while the NDIC is statutorily mandated to pay N4.9 billion insured deposits to the affected depositors, the balance of N4.9 billion uninsured deposits would be disbursed to them on realisation of physical assets and recovery of debts owed to the failed MFBs.

Since the commencement of payment exercise on December 6 last year, the corporation has already paid N1.492 billion to about 45,000 depositors of the 91 closed MFBs out of the N4.9 billion of insured deposits due for payment, Mr Birchi said.

Second round payment

During the second round payment expected to commence on Tuesday, May 3, 2011, the NDIC spokesman said about N2.177 billion would be disbursed to the remaining 393,000 depositors of Integrated Microfinance Bank (IMFBs).

The corporation had disbursed about N529 million to 21,000 depositors of the IMFB between January 31 and February 4, 2011 as insured sums of the affected institutions.

According to Mr Birchi, depositors in the 11 remaining MFBs are scheduled to be paid as soon as their records are made available to the corporation.

They include Bristol MFB, Mustason MFB, Newgate MFB, Primate MFB, and South West MFB in Lagos State; as well as Embrace MFB and Homeland MFB in Yenagoa, Bayelsa State; while the rest include Cubic MFB in Benin City, Edo State; Galaxy MFB in Warri, Delta State; Gamji MFB in Birnin Kebbi, Kebbi State; and Standex MFB in Onitsha, Anambra State.

Under the deposit insurance system, depositors in money deposit financial institution are supposed to be protected as well as given guarantee through the settlement of insured funds when their banks can no longer repay their deposits. The maximum insured balance payable to microfinance depositors in line with the 2005 microfinance policy issued by the CBN is N100, 000 only.

The 2005 policy, which created a platform for the establishment of microfinance banks, also established a framework for the CBN’s supervision of MFBs.

Though proprietors seized the instrumentation of the new policy to float over 800 microfinance institutions across the country, the apex bank was to discover during the recent reform programme initiated by the Sanusi Lamido Sanusi management that most of the banks derailed from the objectives they were set to achieve, resulting in the revocation of operational licences of 224 of them.

Following investigation of the activities and records of the 103 MFBs, most of them were found to have been run aground by their directors and officials who engaged in insider-related abuses such as outright stealing, granting of unauthorised credits, and diversion of depositors’ funds.