Nigeria: CBN Reviews Minimum Capital Base for Microfinance Banks
The Central Bank of Nigeria (CBN) has raised the minimum capital base of microfinance banks in the country giving them up to April 2020 to recapitalise.
The CBN in a circular issued and signed by the director, financial Policy and Regulation department, Kevin Amugo, had increased the minimum capital base of national MFBs to N5 billion while that of state was increased to N1 billion. Prior to the circular, the minimum capital base for national MFBs was N2 billion while state MFBs are required to have N100 million. Under the new capital base Unit license MFB which previously requires N20 million minimum paid up capital to operate will now requires N200 million.
The CBN said the move had become inevitable as the sector had been ad been contending with challenges such as inadequate capital base, weak corporate governance, ineffective risk management practices, dearth of requisite capacity and mission drift. Given the role of microfinance banks in economic growth and development, the CBN introduced the Microfinance Policy, Regulatory and Supervisory Framework on December 15, 2005 (revised in 201 l). The key focus of the policy was among others, to increase financial inclusion rate in the country: improve access to financial services for the active rural poor; and pursue poverty eradication. The microfinance banking sub-sector, in pursuit of the above objectives.
It said having reviewed the state of health of the industry and it 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 subsector and reposition microfinance banks towards improved performance.
"Consequently, the CBN, in exercise of the powers conferred on it by the Banks and Other Financial Institutions Act and in furtherance of its mandate to promote a sound financial system in Nigeria, hereby increases the minimum capital requirement of microfinance banks as follows: Unit Microfinance Bank N200 million, State Microfinance Bank N1 billion, National Microfinance Bank N5 billion. "To meet these requirements, existing microfinance banks are expected to explore the possibility of mergers and acquisitions and/or direct injection of funds. Read more from All Africa.
Source: All Africa