Akinjayeju: Microfinance banks may suffer if leadership succession is not managed

Foyinsola Akinjayeju, an associate partner at Phillips Consulting Limited (pcl), says microfinance banks in the country could be faced with sudden exits and reduced performance if the leadership succession process is not properly managed.

Speaking at a conference organised by the Lagos state chapter of the National Association of Microfinance Banks, Akinjayeju said the banks could suffer business failure in extreme cases.

In her presentation, Akinjayeju said: “Preparing the next generation of leaders has become more imperative than ever. Some companies meticulously follow procedures of next-in-line for leadership roles yet their new leaders are ill-prepared for the role and end up as corporate placeholders, at the centre of chaos.

She advised business leaders not to plan for the present alone, but rather to ask themselves if their people were the best talent for the future, a situation which could be influenced through effective succession management.

Stating the difference between both, Akinjayeju said replacement planning focuses only on managerial positions and identifying talent to replace individuals who leave such positions while succession management is concerned with corporate-critical positions across grades, profiling the talent required for such positions, deliberate development of the identified talent, and regular monitoring of the process to measure its effectiveness.

The Central Bank of Nigeria (CBN) released a circular in 2018 on the review of the minimum capital requirements for microfinance banks (MFBs) in Nigeria, with phased implementation to commence in 2020.

According to the CBN, the revision became necessary because a large proportion of the MFBs was contending with inadequate capital base and the sector needed to be strengthened so it could effectively cater to the financial needs of the unbanked or underbanked.

Under the new regulation, MFBs must increase their capital base by 150% for MFBs operating only in rural areas, and 900% for those with national licenses operating in the urban and high-density banked areas by 2021.

To achieve this target, MFBs will look for a fresh injection of capital from existing shareholders, new investors or may undertake mergers and acquisitions (M&As) and an eventuality of leadership change.

Some chief executive officers of microfinance banks are also on the verge of retirement due toAk the policy limiting their tenors to 10 years.