MICROCAPITAL STORY: Microfinance Institutions (MFIs) in Nigeria in Talks about Establishing an Inter-Bank Money Market

According to the Vanguard, microfinance institutions (MFIs) in Nigeria are in talks with Government Banks, known as discount houses, about establishing an inter-bank money market. The market would allow MFIs to lend to each other on a short term basis, allowing them to earn extra returns or cover temporary shortfalls in liquidity. The practice is common in banking sectors around the world.

While details remain scarce, it seems that the five discount houses and several microfinance institutions would have access to the market, which would be run by the Kawaka Discount House. Vanguard reports that Integrated Microfinance Bank (IMFB) and Gapbridge Microfinance Bank were involved in the discussions. Currently, MFIs are excluded by the inter-bank money market of Nigeria, which other commercial banks utilize.

Kawaka House is a government agency which facilitates the short-term money market. In 2007, the company had total assets of USD 605m (in local currency), a debt to equity ratio of 93 percent and a return on total assets of 1.8 percent (pg 26-27 of annual report).

Integrated Microfinance Bank (IMFB) is a for-profit financial institution in Nigeria. As of December 31, 2007, the company had total assets of USD 22m, and a debt to equity ratio of almost 303 percent. A return on equity of was not given. It also had a gross loan portfolio of USD 7m, which included 8,641 active borrowers. All financial data was taken from MIX Market, the Microfinance Information eXchange.

Gapbridge Microfinance Bank is also a for-profit financial institution located in Nigeria. No financial data was available on the company’s website, nor is Gapbridge listed on MIX Market, the Microfinance Information eXchange.

By Greg Casey, Research Assistant

Additional Resources:

Vanguard: Microfinance Banks to Set up Interbank Market

Kawaka Discount House: Annual Report (available here)

Kawaka: Home

Integrated Microfinance Bank: Home

MIX Market: Demand in Nigeria

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