>
The Central Bank of Nigeria (CBN) has increased the capital requirements for the operation of microfinance banks in the country.
In a circular issued on Monday, the apex bank noted that the move was part of efforts to address inadequate capital base in the sub-sector.
“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,” the circular read.
Before the recent review, the capital requirement for establishment of microfinance banks were as follows: Unit Microfinance bank, N20 million; State Microfinance bank, N100 million and National microfinance bank, N2 billion.
Below is the new capital base for each category of micro-finance banks in the country:
1) Unit Micro-finance Bank – N200 million
2) State Micro-finance Bank – N1 billion
3) National Micro-finance Bank – N5 billion
The new minimum capital requirement takes immediate effect for new applications while existing micro-finance banks shall be required to fully comply with effect from April 01, 2020, the apex bank added.
The CBN stated that “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.”