The Central Bank of Nigeria (CBN) on Monday reviewed the minimum capital requirements for microfinance banks, allowing for instalment payment and categorisation of Unit Microfinance Bank into tier-1 and tier-2.
Consequently, tier-1 MFBs are to pay N200 million as minimum capital requirement, while tier-2 MFBs are expected to pay N50 million.
In a circular signed by Kevin Amugo, its director, financial policy and regulation department, the CBN explained that tier-1 Unit Microfinance Banks will operate in the urban and high-density banked areas of the society, while tier-2 Unit Microfinance Banks will operate only in the rural, unbanked or underbanked areas.
To aid the process of recapitalisation, the CBN directed that all tier-1 unit microfinance banks should meet a N100 million capital threshold by April 2020 and N200 million by April 2021, and tier-2 unit microfinance banks should meet a N35 million capital threshold by April 2020 and N50 million by April 2021.
Similarly, state microfinance banks are to increase their capital to N500 million by April 2020 and N1 billion by April 2021, while a national microfinance bank should hold a capital of 3.5 billion by April 2020 and N 5billion by April 2021.
This move is in response to the agitation of operators over the earlier increase in capital requirements by the CBN.
“The new circular addresses two out of four requests we made on minimum capital, which is creating rural MFBs with N50m capital and extending the time,” said Rogers Nwoke, president, National Association of Microfinance Banks (NAMB), in reaction to the CBN’s new directive.
“We appreciate the CBN for listening to us, but as we said before, what is needed is a holistic review of the microfinance policy framework and operational guidelines. Review of capital does not address the issues and challenges of microfinance in Nigeria,” Nwoke said.
Godwin Ehigiamusoe, managing director/CEO, LAPO Microfinance Bank Limited, said the review was a reflection of the CBN’s responsiveness to concerns of actors in the sub-sector. He commended the NAMB leadership for engaging with the regulator in this regard.
The CBN bank had in October 2018 increased the minimum capital requirement of unit microfinance banks from N20 million to N200 million, state MFBs from N100 million to N1 billion, and national MFB from N2 billion to N5 billion. Microfinance operators had protested the increases and had written to the CBN for extension of date and review.
The National Association of Microfinance Banks had earlier disclosed its plans to float a National MFB licence with N10 billion capital base ahead of the full implementation of the capital requirement.
The CBN and the Bankers Committee plan to establish a National MFB across the country using the facility of NIPOST, which is set for launch at the end of the month.
In the National MFB establishment plan, the CBN and the Bankers Committee will utilise the sum of N5 billion as equity from N60 billion Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS) Fund, while NIPOST will contribute its offices in the 774 local government areas.
HOPE MOSES-ASHIKE
