Nigeria is set to launch the Non Interest (Islamic) Microfinance Banking (NIMFB) with the release yesterday of an Exposure Draft guidelines on the regulation and supervision on the sub-sector, by the country’s Central. Bank.
The proposed NIMFBs would be allowed to engage in providing products and services that are permissible for MicroFinance Banks operating in Nigeria provided they comply with the principles under this model and approved by the CBN. But they would only be allowed to use such products and services after obtaining the approval of its Advisory Committee of Experts (ACE) and the CBN.
Under the guideline, the CBN said it would allow three categories of NIMFBs – a Unit NIMFB which would be authorized to operate in one location and be required to have a minimum paid-up capital of N20 million. The unit NIMFB, according to the new rules would be allowed to have only one branch outside the head office within the same Local Government Area subject to availability of free funds of at least N20 million and compliance with the prescribed minimum prudential requirements
The second category is the State NIMFB which would be authorized to operate in one State or the Federal Capital Territory (FCT) and required to have a minimum paid-up capital of N100 million. The CBN Sid this category would be allowed to open branches within the same State or the FCT, subject to the availability of free funds and the prior approval of the CBN for each new branch or cash centre.
The third category- the National NIMFB is authorized to operate in all the states of the federation including the FCT provided in provides a minimum paid-up capital of N2 billion. This category is allowed to open branches in all States of the Federation and the FCT, subject to the availability of free funds and the prior approval of the CBN for each new branch or cash centre, according to the guidelines.
But the prescribed minimum capital requirement for each Category of NIMFB could be reviewed from time to time by the Central Bank of Nigeria.
The CBN noted that exposure draft which comes several years after Islamic banking model was mulled in the country is to encourage the development of the Microfinance sub sector of the Non-Interest Finance sector so as to deepen financial inclusion.
A Non Interest (Islamic) Microfinance Bank (NIMFB) therefore means any Microfinance Bank licenced by the CBN to carry on the business of providing financial services, engages in trading, investment and commercial activities and also provides financial products and services in accordance with the principles of Islamic Commercial Jurisprudence.
The Cbn said it expects a NIMFB to target the economically active low-income earners, low income households, the un-banked and under-served people such as: physically challenged; youths; micro-entrepreneurs; informal sector operators; subsistence farmers in urban and rural areas.
Meanwhile, any Unit NIMFB can transform to a State NIMFB but will have to surrender its licence and obtain a State NIMFB licence, subject to fulfilling the stipulated licensing requirements as provided in the guidelines.
A State NIMFB that intends to transform to a National NIMFB must have at least five (5) branches which are spread across the Local Government Areas in the State of its original operation. “This is to ensure that the State NIMFB has gained the experience necessary to manage a National NIMFB. It shall also be required to surrender its State NIMFB licence and fulfill other stipulated licensing requirements in the guidelines,” the CBN further stated.
But no new promoter(s) would be allowed to apply for a National NIMFB licence, meaning that a National NIMFB must emerge through organic growth from a State NIMFB.
As contained in the 57-page guideline, and inline with Islamic principles, an NIMFB is not to engage in any business operation involving; Riba (interest); Uncertainty or ambiguity relating to the subject matter, terms and conditions of a contract ; Gambling; Speculation, such as short selling, and other derivatives not compliant with the principles underpinning the operations of the NIMFBs.
It is also not allowed to be involved in Unjust enrichment; Exploitation/unfair trade practices; Dealings in pork, alcohol, intoxicants, arms & ammunition, pornography and; Other transactions, products and services which are not compliant with the principles of Islamic commercial jurisprudence.
In addition to the above, NIMFBs are not allowed to engage in the Acceptance of public sector (government) deposits except for the provision of payment services such as salary, gratuity, pension for employees of the various tiers of government, disbursement of financing programme by government agencies, groups and individuals for poverty alleviation on non- recourse basis provided it is in compliant with the provisions of the principles underpinning this model.
