RECAPITALIZING MICROFINANCE BANKS IN NIGERIA: THE CAPITAL MARKET OPTION Presented by Taba Peterside GM/ Head, Listings Sales & Retention , The Nigerian Stock Exchange At the 2nd AGM of the National Association of Microfinance Banks The Women Development Centre, Central Business Area Opposite The Central Bank of Nigeria, Abuja May 12, 2012 5/12/2012 The Nigerian Stock Exchange 1
SESSION ON RECAPITALIZING MFBs THROUGH THE NSE - OUTLINE • RECAPITALIZATION & Financial Inclusion through UNLOCKING Microfinance; INTRINSIC VALUE THROUGH • The Journey by The Federal THE NIGERIAN STOCK Government on Microfinance EXCHANGE Provision; • Snapshot of Current Regulatory Requirements for MFBs; • Overview of Nigeria's Capital Market • Capital Market Instruments; • Benefits of Listing; • Steps to Actualization.
Financial Inclusion through Microfinance • Microfinance is usually understood to entail the provision of financial services to micro-entrepreneurs and small businesses, which lack access to banking and related services due What is to the high transaction costs associated with serving these client Microfinance? categories (Wikipedia) . By extension, Microfinance is the provision of financial services, which include savings, insurance and loans to poor and low-income earners in the society. • The Central Bank of Nigeria recently developed an exposure draft on its strategy towards financial inclusion in Nigeria, which is Financial aimed at reducing the percentage of adult Nigerians who are excluded from financial services from 46.3% (recorded in 2010) Inclusion to 20% by 2020. (Microfinance Africa). • This is expected to create a wider access to financial services at reasonable cost by households and enterprises currently excluded. 5/12/2012 The Nigerian Stock Exchange 3
Journey by The Federal Government on Microfinance Provision Initiative 1970 - Date Nigerian Agric. Sectoral Insurance Corp./ allocation of National Poverty credits Eradication Prog. (NAPEP) Agric. Credit Family Economic Lending as a % of Guarantee Scheme Advancement savings (rural Fund (ACGSF)/ Prog. (FEAP)/ areas for rural Nigerian Agric. Co- Peoples Bank of people) op. & Rural Dev. Nigeria (PBN)/ Bank Ltd Community Banks Rural Banking Programme Microfinance The Microfinance Policy, Regulatory / Concessionary Banks and Supervisory Framework was interest rate launched on December 15, 2005, amended April 29, 2011. 5/12/2012 The Nigerian Stock Exchange 4
Snapshot of Current Regulatory Requirements for MFBs in Nigeria Capitalization Requirement A.Unit Microfinance Bank Authorized to operate in B. State Microfinance Bank one location with minimum paid up share Authorized to operate and capital of N20 million. open branches in only one State or the Federal Capital C. National Microfinance Bank Territory (FCT), with minimum paid up share Authorized to operate and open capital of N100 million. branches in more than one State including the Federal Capital Territory (FCT), with minimum paid up share capital of N2 billion. 5/12/2012 The Nigerian Stock Exchange 5
MFBs in Nigeria: Diagnostics Implication of New Licensing Reasons for Past Opportunities/ Gaps in Requirement Failures Micro financing • Unit MFBs: Exposed to risk • Lack of adequate skills set • Available statistics reveal that factors associated with its by operators for effective over 80 million Nigerians single location; Need for service delivery; (about 65% of the active integration with other MFBs • Lack of proper corporate population) do not have access or Commercial Banks; governance and to formal financial institutions; • State MFBs: Wider coverage management structure, • Microfinance Solutions are and attendant opportunities inefficient internal required to address the gap in across a State, although controls and poor credit terms of savings, credit and exposed to state-specific administration; other associated financial policies and risk factors; • Lack of adequate capital services; • National MFBs: No base leading to • Micro funding is expected to restrictions on operating insufficient loanable increase employment network and business model funds. opportunities, enhance across the entire country. household income and create However increased cost and wealth. capital requirement 5/12/2012 The Nigerian Stock Exchange 6
NSE Vision and Goal 5/12/2012 The Nigerian Stock Exchange 7
Overview of Nigeria’s Capital Market Statistics as at May 10, 2012 NSE All Share Index 8.9% Two key indices 22,511.30 (YTD) All Share Index Fixed Income (NSE ASI) Market cap: Bloomberg NSE N5.50tn 30 Index (NGSE30:IND) Equity Market Capitalization 10.21% (YTD) N7.18 tn Equity Products Approx. 200 Market cap listed companies N7.18tn. • Total Market Cap = N12.68tn 2012 • 22.65% of GDP Powered by over 200,000 Institutional Investors and about 5 million retail investor accounts * CSCS Report 2010 5/12/2012 The Nigerian Stock Exchange 8
Our Markets Cover Blue Chip & Growth Companies ASeM Board Main Board • The Alternative Securities Market is a specialized board • The Main Board of The Nigerian Stock Exchange is for small and mid-sized companies, with high growth designated for large sized blue chip companies. • It is a platform for connecting issuers and investors for potential. • It is a platform to drive growth and development of investments and long term capital raising • Currently has 187 Quoted Companies spanning SMEs through long term capital injection and sound corporate governance. multiple sectors of the economy with N7.18tn equity • Currently has 12 Quoted Companies spanning multiple market capitalisation as at 10/05/12 sectors of the economy with N4.10bn equity market capitalisation as at 10/05/12 Services Agriculture Conglomerates 1% 0% Healthcare Consumer Goods Oil & Gas 1% Construction/ 0% 6% 3% Real Estate Industrial Goods Natural Construction/ 1% 5% Resources Real ESTATE Services 0% 2% 14% Consumer INDUSTRIAL Natural Goods GOODS Resources 31% 29% 0% Financial Services Oil & Gas 31% ICT 74% 1% Healthcare 1% Board Segmentations aligned with the Nigerian economy which is growing at over 7% per year 5/12/2012 The Nigerian Stock Exchange 9
NSE – Home to First Rate Companies 5/12/2012 The Nigerian Stock Exchange 10
NSE Sector Classification Destination Segmentation of MFBs Consumer Conglomerates Financial Goods Construction Services /Real Estate Subsectors Natural Resources • Banking; Utilities • Healthcare Insurance Carriers, Industrial Goods Brokers and Services • Mortgage Carriers, Oil & Gas Brokers and Services Agriculture Services ICT • Non-Depository Credit Institutions; • Other Financial Currently, NPF Microfinance Bank Plc is the only listed Microfinance Bank Institutions in the Banking Subsector of Financial Services Sector (On the Main Board) 5/12/2012 The Nigerian Stock Exchange 11
NSE – Positioning for the Future Strong “21 st ” Target-Based Regulation First-Rate Growth- Century Business and Investor Enabling $1T Market Technology Development Supporting Protection Market Capitalization Strategies Efforts Regulatory Strategies Structure Programs 5/12/2012 The Nigerian Stock Exchange 12
Transforming Company Listings Listings • Introduced quantitative elements for equities to make it flexible and competitive in line with global best practice Requirements • Ensuring all our companies realize the value of listing on the Exchange through value added services such as: Value Added 1. Corporate Governance 2. Investor Relations Services 3. Institutional Services 4. Analyst Coverage 5. Corporate Access 5/12/2012 The Nigerian Stock Exchange 13
Benefits of Listing to a Microfinance Bank Code of Access to Capital Transparency Corporate Perpetuity of for and Credibility Governance as Operations Recapitalization/ in Operation a competitive Expansion tool Microfinance Bank Co. Platform for Visibility: attracting Risk Sharing Value Creation Inclusion in additional amongst & Price major investment and Shareholders Discovery Performance investors Indices 5/12/2012 The Nigerian Stock Exchange 14
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