Microfinance banks, specifically the unit MFBs, can now enjoy sustained revenue as the Federal Government has exempted them from paying Valued Added Tax (VAT), BusinessDay findings have revealed.
The exemption, according to operators, was to enable microfinance banks have sustained income for on-lending to their clients.
Before the exemption from VAT, microfinance banks were paying 5% on inany income made on any transaction, investment, services, and Commission on Turnover (COT).
With the recent exemption by the government through the Federal Inland Revenue Service (FIRS) all those monies would be used for on-lending to low income earners.
Jethro Akun, former president of National Association of Microfinance Banks (NAMB), confirmed to BusinessDay that unit microfinance banks have been exempted from paying VAT.
“The exemption is a welcome idea; we have been working on that for a while. We appreciate the authorities for listening. With the exemption, our bank charges is reduced, which translates positively to our bottom-line. From the nature of our transactions, most common Vat-able item visible in our books is COT”, Caleb Adewale Adeleke, managing director, Corestep Microfinance Bank Limited, Lagos, said in an e-mailed response.
The VAT was introduced by the Value Added Tax Decree No 103 of 1993 as a consumption tax on specified goods and services and has become a major contributor to tax. VAT is usually paid by anyone who consumes ‘vatable’ goods or services.
The association’s revenue stood at N34.4 million on December 31, 2013 the same as in December 31, 2012.
However, the microfinance banks in the country disbursed a total of N97 billion loan to 5 million borrowers at the end of the financial year December 31, 2012.
Total deposits of MFBs as at December 31, 2014 was N125 billion, total clients at the same period was 6 million, total assets stood at N222 billion, a total of 22,000 Nigerians were employed and total branch/cash centers were 1,732.
