The Central Bank of Nigeria (CBN) has pegged the minimum capital requirement for national microfinance bank in the country at N5 billion.
According to a circular signed by the Director of Financial Policy and Regulation Department, CBN, Mr. Kevin Amugo, the capital base for unit microfinance bank is N200 million, while for state microfinance bank it is N1 billion.
“The new minimum capital requirement takes immediate effect for new applications while existing microfinance banks shall be required to FULLY comply with effect from April 01, 2020.”
The apex bank said the new requirements became necessary as a result of the role microfinance banks play in economic growth and development.
Making reference to the Microfinance Policy, Regulatory and Supervisory Framework initiated in December 2005 and revised in 2011, the CBN noted that the key aim of the policy was, to increase financial inclusion rate in the country; improve access to financial services for the active rural poor; pursue poverty eradication, among others.
“The microfinance banking sub-sector, in pursuit of the above objectives, had been contending with such challenges as inadequate capital base, weak corporate governance, ineffective risk management practices, dearth of requisite capacity and mission drift.
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“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 said.
It also said existing microfinance banks are expected to explore the possibility of mergers and acquisitions and/or direct injection of funds in order to meet the new requirements.
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, the CBN said.
It further explained that institutions that meet the capital requirements in addition to demonstrating the existence of strong corporate governance in their operations would be allowed to open account at the CBN office within their state of operation. Such institutions would also be avenues for micro funding activities of the CBN and the Development Bank of Nigeria.
