CBN increases capital base for Microfinance banks by 900%

In a bid to tackle the challenges of inadequate capital in microfinance banks (MFBs) in the country, the Central Bank of Nigeria (CBN) has raised the capital requirements for the financial institutions.

The upward review of the requirements was made known by CBN in a circular to all MFBs in the country by its Director, Financial Policy and Regulation Department, Kevin Amugo, on Monday.

According to the circular, the minimum capital base for unit and state MFBs was raised by 900 percent from N20 million to N200 million and from N100 million to N1billion, while that of national MFBs was jerked up by 150 percent from N2 billion to N5 billion.

National MFBs are allowed to set up business offices across the country, while state MFBs are allowed to have offices within a state licenced and unit MFBs operate only one office in designated location.

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Amugo noted that the new minimum capital requirement takes immediate effect for new applications while existing MFBs shall be required to fully comply with effect from April I, 2020.

“The CBN has reviewed the state of health of the sub-sector and is of the view that microfinance banks, as presently constituted, would be unable to meet the critical targets set out in the Microfinance Policy, hence the need for specific reforms to strengthen the sub-sector and reposition microfinance banks towards improved performance.

“To meet these requirements, existing microfinance banks are expected to explore the possibility of mergers and acquisitions and/or direct injection of funds. The Revised Regulatory and Supervisory Guidelines for Microfinance Banks, Code of Corporate Governance for Microfinance Banks and sector-specific Prudential Guidelines for Microfinance Banks would be issued in due course,” the circular read.

 

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