Obinna Chima
30 November 2011
Operators of Finance Houses in the country have expressed their willingness to embrace the proposed reform of the sector by the Central Bank of Nigeria (CBN).
The umbrella body of the operators – the Finance Houses Association of Nigeria (FHAN), explained that if the CBN defines the terms for the proposed exercise, a lot of investments would be attracted into the sub-sector.
Deputy Governor, Financial System Stability, CBN, Dr. Chiedu K. Moghalu, had disclosed that 82 out of a total of 104 Finance Houses licensed in the country were unhealthy and deficient of the required capital.
Moghalu had disclosed that the findings were from a recent-on-site examination by the banking sector regulator, even as he said that the CBN would roll out a reform package to reverse the trend early next year.
But President of FHAN, Mr. Eddie Osarenkhoe, said: “It is like chicken and egg situation. You cannot attract funding when your process of operation is not fully defined. If the CBN comes out to strongly define the roles, and people now see the income that will move into that sector, then a lot of investments will be attracted.”
Osarenkhoe stressed that the present minimum capital requirement for the sub-sector was gross inadequate. He urged the banking sector regulator to “significantly raise the minimum capital base in the near future.”
This according to Osarenkhoe, would immediately address partly, the issue of funding as well as create a barrier to entry into the sub-sector for “fringe players and mushroom institutions.” He also charged the CBN to also put in place an intervention fund for the sub-sector.
The FHAN boss added: “We also believe that there is need to put in place, a funding plan where we can assess funds. In the course of intervention funds they are putting all over the place, they are supposed to identify Finance Houses as major players in assessing those funds.
“The banks were the ones who gave the borrowers loans they are trying to restructure, instead of finance houses. But all these while, the Bank of Industry (BOI) has been working with the banks, which is certainly not proper. We believe finance houses are supposed to play middle roles in accessing these loans.
“We believe that the CBN has to address it in a way that such is the case. We are calling for a sustainable aid for the finance houses sector. We are talking about role definition. The banks are supposed to be financing infrastructure and other big projects. The banks are busy lending money to people in the national assembly, and are not doing what they are supposed to do.”
According to Osarenkhoe, “the banks are supposed to help government in development. They are not supposed to be competing with finance houses. The banks are supposed to advance loans to professional institutions such as Finance Houses, which will then loan the funds to small and medium scale enterprises (SMEs).”
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