By Adolphus Abraham
Last week we commenced a series that focuses on the nature of business MfBs are allowed or not allowed to engage in. We already treated those businesses they should have no business with. Since the last episode was a little lengthy, we shall break the allowable business into 2 parts.
The CBN has made revenue generating base for MfBs as wide as possible. The idea is to guarantee sufficient income for sustainability and products for financial inclusion. The following are some of the permissible business.
Deposit: – The acceptance of deposit in the form of savings, fixed term, target or project specific deposit and demand (the maintenance of a current account) from individuals, groups and associations is a preserve for MfB as a CBN licensed entity. Please note as a matter of emphasis that acceptance of public sector deposits is an exception.
Loans:- This is the life blood of all MfBs. Provision of credit to its customers, including formal and informal self-help groups, individuals and associations forms a core in the activities of an MfB.
Monitoring: – Due to the nature of target market for MfBs, a lot of ancillary training is required to bring the quality of lending to the standard required for measurement. Hence, when loans are advanced, monitoring of loan usage among its customers is a key role that the Mfb should engage in. They are expected to help borrowers to build capacity in clear areas like record keeping, small business management, sales and any skill required to further their prosperity.
Debentures: – Investors will find this attractive. MfBs in sourcing for fund can issue redeemable debentures to interested parties to raise funds from members of the public and prospective investors with the prior approval of the CBN. Debentures are debt notes with a fixed tenor. They can be redeemable, convertible to equity or otherwise. This forms a good exit strategy for investors who do not want to be there on the long haul.
Collection of Financial Instrument: – Collection of money or proceeds of banking instruments such as cheques on behalf of its customers (individuals, groups and association) are allowable hence MfBs can collect cheques and clear them through their correspondent banks under stiff agreements and indemnity.
Disbursement vehicle: MfBs easily become handy as they provide loan disbursement platform for the delivery of credit programmes initiated or promoted by government, agencies, groups and individual for poverty alleviation on non-recourse basis.
Account Relationship: – They can open, maintain and operate various types of account (Savings, fixed deposit, current account etc.) with other banks in Nigeria to enable them discharge their duties.
Investment: – Place its surplus funds in suitable instruments through their correspondent banks. They are also expected to invest in Treasury Bills. Note to ensure that Treasury Bills are purchased through correspondence banks otherwise the CBN may sterilize TBs bought from other sources.
Interest Payment: Pay and receive interests on customer’s investment in their custody as agreed in accordance with existing guidelines.
Leasing/Hire Purchase: – Operate micro leasing facilities, micro hire purchase and arrangement of consortium lending. They can also supervise credit schemes to ensure the desired beneficiaries have access to the services they require to boost their business.
Others: MfBs can act as agents for the provision of mobile banking and micro insurance services to its clients, provide domestic remittance of funds and safe custody, provide a platform for payment services such as salary, gratuity, and pension for employees of the various tiers of government.
