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NDIC threatens to withdraw insurance cover for MFBs

By on September 28, 2013

The Nigeria Deposit Insurance Corporation has threatened to withdraw insurance cover from any microfinance bank that consistently fails to pay its premium.

The Managing Director/Chief Executive, NDIC, Alhaji Umaru Ibrahim, made the threat when officials of the National Association of Microfinance Banks visited the corporation on Thursday in Abuja.

He said the move might be adopted as part of punitive measures to discourage the practice whereby microfinance banks refused to pay premium.

Insurance premium is what the NDIC relies upon to settle depositors in case of bank distress.

Ibrahim said so far, N398m had been received from the sector as insurance premium, adding that about N44m was still being expected from about 100 MFBs.

He said, “The need for self regulation cannot be overemphasised. You have even advocated that we come up with a system of punitive measures of enforcing payment of premium.

“This is a big issue to us, and from the figures, most of the MFBs this year have paid their premium. The figures I have are that about N398m have been collected and we have yet to collect about N44m from almost 100 of your members.”

He said the initiative that would have enabled the corporation to debit their accounts directly in case of default had not been accepted by majority of the operators in the sector.

Ibrahim said, “We introduced this about a year ago when we sent out a form of dialogue with your members on the need and how it would work.

“Unfortunately, the response we got was not too encouraging. But these are measures that we want to undertake to safeguard potential default and I will like to urge you to continue to educate your members on this.

“These days they say no premium, no cover. And we can decide to say that any MFB that consistently ignores its obligation to us we will remove our insurance cover from those banks and we will tell everybody and you know what that means to the public.”

Ibrahim also said the corporation, in collaboration with the law enforcement agencies, would soon begin the prosecution of fraudulent bank officials.