NDIC Managing Director/CEE, Alhaji Umaru Ibrahim

…We are bringing protection to Fintechs to ensure safety too – MD

BY EMEKA EJERE

The Nigeria Deposit Insurance Corporation (NDIC) has responded to technological innovations and applications in financial services with the establishment of a new unit named “Fintech and Innovations unit”. A number of financial analysts have in recent times expressed dissatisfaction with what they described as the agency’s lack of capacity to face challenges of a more sophisticated financial system.

They regretted that the regulatory body’s operations were still too routinely for a corporation dealing with risk management.

One of them Mr. Teslim Shitta-Bey, investment banker and senior researcher at Proshare, observed that the NDIC has fulfilled its mandate as a regulator but should develop extra capacity to face the challenges of a financial system, which he said, has become a lot more sophisticated than it was when the agency was established.

He said, “As a regulator, the NDIC has fulfilled its mandate. However, the financial system is getting a lot more sophisticated than it was when the corporation was established, so NDIC has to grow with time.

“But it appears it is just doing the routine. For a corporation that is dealing with risk management, it should be able to detect potential risks and begin to work ahead to prevent any damage. It should be more proactive than it is.”

The corporation in a statement signed by Mohammed Kudu Ibrahim, on behalf of the director, Communications and Public Affairs, said the Fintech and Innovations unit was established to align with contemporary trends in advanced economies.

It stated: “The development is also in consonance with the Corporation’s Strategic Vision, which is to become one of the best deposit insurers by the year 2020.

“The new Unit, which is domiciled in the Insurance & Surveillance Department of the Corporation, is expected to engage and collaborate with innovators in the financial and non-financial sectors of the economy to identify, develop and promote technology-driven solutions that would protect depositors and improve the safety and soundness of insured financial institutions.

“The unit is expected to enable the corporation identify disruptions and associated risks of Fintech and Innovations on deposit insurance; articulate the use of Fintech for Early Warning Signals (EWS) and Prompt Corrective Action (PAC); Identify other digital currency deposits for the purpose of insurance coverage; evolve supervisory measures for digital banks; and enhance existing consumer protection measures as they relate to digital deposits in collaboration with other safety net players.”

Incidentally, the managing director and chief executive officer of the corporation, Mr. Umaru Ibrahim, had at the 2019 budget estimates before the House of Representatives stated that in fulfillment of the corporation’s mandate to provide technical assistance to licensed banks, the NDIC in collaboration with the CBN, had invested in the acquisition of a new software called the Integrated Regulatory Solution (IRS) for a more robust surveillance and supervision of insured financial institutions in the country.

According to Ibrahim, the software would enable deposit money banks (DMBs) generate real time online data among themselves as well as help regulators to access data online from the DMBs. He also disclosed that the National Association of Microfinance Banks Unified Information Technology Platform (NAMBUIT) was introduced by CBN/NDIC and Association of MFBs to enhance the operational capacity of the MFBs.

The CBN and NDIC are financing the project in the ratio of 60per cent and 40 per cent respectively in view of the importance of the project to the growth of the MFB sub-sector.

At a dinner held in commemoration of the corporation’s 30 anniversary late last year, Mr. Ibrahim had expressed optimism in tackling emerging threats facing the banking industry by employing artificial intelligence and digital technology. He said the new challenges facing the industry include new emerging operational risks, phenomenal growth of assets of the Nigerian banking industry and its implications for supervision, regulations, among others.

He said, “Our growing population, phenomenal growth of the Nigerian population, young population and the demographic shift, changing customer preferences, poverty and unemployment are challenges which could largely be addressed if we have a very stable banking system.

“We are also aware of the emerging role of financial technologies (fintechs) in the financial landscape, block-chain technology and phenomenal incursion of digital currencies globally and Nigeria is not left behind. In fact, it is in appreciation of this that arrangements are underway to develop a special team of experts in innovation and digital technology in the NDIC.”

The NDIC MD disclosed that actions were being taken by the corporation in this light. For instance, the board of directors and management of the corporation visited Korea and Taiwan a month and a half earlier to sign a Memoranda of Understanding with organizations in order to learn how to improve in the area of internet banking, and digital technology in general.

Ibrahim said, “As we speak, I think Korea has just licensed two or three internet banks only and we asked them, “How are you going to supervise and regulate these banks that will operate 24/7 without a human being?

“They said they too are having sleepless nights but will have to catch up. They are going to employ artificial intelligence to solve their problems to ensure effective supervision and regulation of these institutions,.”

Speaking recently on the future outlook of the corporation in respect of providing solutions through technological advancement, Mr. Ibrahim said:

“As a dynamic and focused organisation, the NDIC will be collaborating with the CBN and other stakeholders in the implementation of the financial inclusion strategic plan. When we started in 1989, deposit insurance was not extended to micro-finance banks and primary mortgage banks.

“But, we know the critical role they played in the development of any economy. But, today NDIC has extended deposit insurance to micro-finance banks as a way of promoting financial inclusion and enhance public confidence in the system.

“Again, recently we have subscribers of mobile money operators. NDIC has also extended deposit insurance cover to them. We know the role financial technology is playing today. Everybody is operating on one mobile application on the other.

“There are people who have not visited banks in the last several months because everything is done online. There is a protection we have brought to them to attract more people on board.

“We are ready to protect depositors in the system and ensure the system is safe and sound in view of the critical role they play in the banking system of any nation. That is the picture of our future outlook.”