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When fraudsters take over micro finance banks

The fund manager which claimed to have been registered by Abuja Municipal Area Council (AMAC), Federal Capital Territory (FCT) closed its doors on 10 December…

The fund manager which claimed to have been registered by Abuja Municipal Area Council (AMAC), Federal Capital Territory (FCT) closed its doors on 10 December 2009 with the promise to reopen on 11 January 2010.

Our reporter who visited the place last week and peeked through, reported that he could see only dust-covered plastic chairs and desks. Samuel said valuable items including a television set, a desktop computer and water dispenser had been moved out of the office before its final closing.

Though it is difficult to come up with the exact amount of money the cooperative society scooped, 10 marketers who worked for it reported their individual collections amounting N4,267,661. Seventeen marketers were on roll. This is not to talk of the amount remitted by the remaining seven marketers the society recruited in that Noble Shopping Complex alone and those who came on their own to pay fixed deposits.

In a petition to the Economic and Financial Crimes Commission (EFCC), the 10 marketers maintained that the cooperative society’s branches in Gwagwalada, Abaji, Dei-dei and Zuba (in FCT) and Ilorin in Kwara State are not functioning.

Samuel said he had suffered greatly in the hands of aggrieved customers. He said since they (customers) cannot find the managers of the financial institution, they (marketers) who worked for the cooperative have become target for revenge by the aggrieved depositors.

He said the General Manager of the society whose name he only knew as Jude would not pick calls. “The only way to make him respond is through text message,” he stated noting that the man keeps promising to return but no one sees him.

He said managers of Noble Shopping Complex have asked Jude to come and renew his rent which was due last month but he said he is having some financial constraints. That he promised to come back when he might have disposed some assets and raised money from them.

The cooperative society’s website www.koffyng.com shows the company’s incorporation number as RC:11464. The Management link on the top menu of the society’s website is curiously disabled. Efforts to get to the list of managers of the company were unsuccessful. The menu gives only Products, Home, About us, Goals, Products, Customers, Investments and Contact us.

Ironically, the society claims it “…came to being out of desire to harness our abundant human and material resources for the creation of wealth for mankind. Consequently help in poverty reduction and eradication. Also to cultivate the habit of thrift culture.” But now, those who deposited their money and those who worked for the society are telling a different story.

As at the time of filling this report, EFCC had not acted yet.

Another case

Integrated Microfinance Bank (IMFB) was one of the “most seen successful” microfinance banks in Lagos. With branches in 24 states and over 700,000 clients in its kitty, its Managing Director and CEO, Simon Akinteye prided himself as one of the finest bankers in Nigeria, “winning” awards here and there, riding one of the most expensive cars. But today the story has changed.

In August 2009 when the global financial meltdown was staring the nation in the face, Akinteye told journalists in Lagos that his bank was not doing badly. According to him, what was happening to IMFB was a function of the global meltdown at the time.

He explained, “The entire financial system is going through a phase and that phase is confidence. But the microfinance industry in Nigeria is young, and issues have always been: will the banking public have confidence in microfinance? When the global financial crisis persisted, with this recent crisis in our banks and other issues, we noticed panic withdrawals in our bank. It’s not because they need the money but because they are afraid.”

Following panic withdrawals, he said the bank had concluded plans to re-enforce its operational activities with at least N1.1 billion to meet its customer obligations and shore up confidence of depositors.

Akinteye said with the injection of about N1.1 billion into the bank, the bank would be more than ready to satisfy all customers’ requests and keep its loans running because its capital base would not long hit over N4.4billion.

The discussions he said were almost complete with at least two foreign core financiers who would take a minimum of 20 percent equities in IFMB adding that the process of regulation would also complete soon and an extra ordinary general meeting would be called so shareholders could ratify the move taken by the board.

He also said IMFB was adding value to the economy. “We have direct staff of about 3,000 and in the last two years, we have disbursed aggregate loans of more than N10 billion to about 82,000 grassroots people,” he once maintained.

IMFB he said expanded from four states to 24 states in 2009 with 700,000 clients.

Few weeks after these claims, the bubble burst, the bank customers flooded the headquarters of the bank at Adeniyi Road, Ikeja Lagos to collect their hard-earned money only to discover that the office gate was under lock and key. Even as at yesterday, the gate was still locked while thousands of customers have been left alone, licking their wounds.

It was however learnt that the erstwhile CEO, Akinteye is currently in Akure, Ondo State. It was gathered that he has opened another microfinance bank under a new name. These are few of the numerous cases of collapsed financial institutions in Nigeria.

Currently, there are 930 microfinance banks operating in the country with 205 of them based in Lagos. But most of them recorded failure. For instance, IMFB, Milestone MFB, Bristol MFB, KFC MFB and Unique MFB are just five among other failed microfinance banks.

CBN’s worries

The Central Bank of Nigeria (CBN) last month said it would liquidate any microfinance bank engaged in fraudulent practices and hand over its operators to the Economic and Financial Crimes Commission (EFCC).

The apex bank has been putting notices, alerting the general public to the prevalence of illegal operators in the financial sector.

CBN said: “There has been an upswing in the activities of unscrupulous people parading themselves as fund managers/finance companies to swindle members of the public of their hard-earned funds. Unfortunately, many people out of ignorance have fallen victim of the activities of those illegal instructions.”

CBN said promoters of these illegal institutions are however, migrating from one part of the country to the other and continue to enjoy patronage from unsuspecting members of the public.

“Consequently, members of the public are hereby advised to ensure that they confirm the status of any company offering alluring incentives and interest rates on deposits/investment from the CBN or SEC before entrusting their money with them,” the bank warned, adding, “…anyone that patronizes the unlicensed institutions does so at his or her own risk.”

When contacted, the head of corporate communications, CBN, Mal Mohammed Abdullahi acknowledged that CBN had been inundated with complaints by victims of these fakes especially in the Micro Finance Bank (MFB) area.

He said both CBN and the Nigeria Deposit Insurance Corporation (NDIC) had in March begun examination of the banks stressing that 350 MFBs have been audited. All this is meant to determine the real number and financial conditions of the MFBs.

Mr Olufemi Fabanwo, the CBN Director, Other Financial Institutions Department (OFID) on Sanctions, had told the News Agency of Nigeria (NAN) in Lagos that CBN would expose such fraudulent operators.

Fabanwo said if any of the five failed MFB operators is found to be fraudulent, he or she would be handed over to EFCC or any other anti-graft agency. According to him, for microfinance banks that are still solvent, but needed management experts, there will be some kind of special restructuring.

He said NDIC had conducted examination on 150 microfinance banks while the apex bank had carried out similar examination on some microfinance banks in 2009. “All licensed microfinance banks are dully insured by the NDIC and NDIC will step in after the comprehensive report has been compiled,” he said.

The CBN chief, however, assured customers of the failed microfinance banks that their money deposited with the banks is in safe custody. This clearly runs contrary to the notice CBN has been placing in newspapers. CBN warns that anyone who is duped by the so called finance mangers will have themselves to blame. This point was particularly stressed by the head of corporate communications.

Experts query CBN, NDIC

Frank Ogiamien of Partfinder Securities blamed the striving of illegal financial operators on the weakness of the regulators. “What is happening now is direct indictment on our regulators such the Central Bank of Nigeria, SEC and NDIC. The agencies have failed in their capacities as the main regulators to supervise the financial sector effectively. Clearly, what has happened over time was that operators have not lived up to expectation,” he said.

He said a new regulation is required to monitor the activities of the microfinance banks and other financial organisations in the country.

Managing Director of Technoglass Mr John Aluya told Sunday Trust that “from the inception of microfinance banks, they were not well structured.  CBN needs to look at them so they can have sufficient capital base. You can’t run a bank when you don’t have enough money to pay out to customers. In my understanding, the microfinance banks don’t have enough capital base to function and support SMEs.”

Chief Executive Officer, Fresh Field Asset Management Limited, Abuja and former Spring Bank Regional Director, North, Abdulrasheed Abubakar said no truly asset management company can engage in fraudulent acts.

“Those people are not asset management companies; they are credit and thrift societies. For you to be registered as an asset management company, you would need at least N20 million capital base. You would also need to register with the Securities and Exchange Commission,” he explained.

He noted that cooperative and thrift societies are able to swindle people because they don’t have any relationships with their clients but asset management companies survive based on their relationships with their clients.

According to him, the job of asset management companies demands high level integrity, trust and confidentiality.

On the CBN warning, he said CBN has started well by warning the general public about the fraudsters. But beyond the warning, CBN also needs to educate Nigerians on activities of these fraudsters.

“The general public needs to question these people. Ask them how they intend to generate the bogus interest they promise,” he noted.

When will regulators strike?

It was gathered that it is not only unregistered financial bodies that are duping the general public. Even the so-called registered ones are in the game. A lot is expected to be heard after CBN and SEC might have concluded their examinations.

Meanwhile, as CBN continues to sponsor its newspaper advertorials, warning the general public about the prevalence of illegal operators in the financial sector, helpless Nigerians are daily ripped off by the charlatans.

Many have already gone down with broken hearts after losing huge savings.

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