Written by on March 25, 2019

Microfinance Bank operators in the country have commended the
Central Bank of Nigeria, CBN, for reviewing the minimum capital
requirement for the industry as well as the extension of the
recapitalisation deadline. Governor, Central Bank of Nigeria (CBN), Mr
Godwin Emefiele Last year, the CBN raised the minimum capital base
for the three categories of MFBs with December 31st 2020 as the
deadline for compliance. The minimum capital base for national MFBs
was raised to N5 billion from N2 billion, state MFBs was increased to
N1 billion from N200 million while that of Unit MFBs was increased to
N100 million from N20 million. However the CBN last week
announced a graduated extension of the deadline to April 2021, while it
categorised Unit MFBs into two namely Tier 1 Unit MFBs and Tier 2
Unit MFBs. In a circular signed by the Director, Financial Policy and
Regulation Department, Mr. Kelvin Amugo, the CBN stated: “Unit
microfinance banks shall comprise two tiers; Tier 1 Unit MfBs, which
shall operate in the urban and high density banked areas of the society;
and Tier 2 Unit MfBs, which shall operate only in the rural, unbanked or
underbanked areas.” Under the categorisation, while the minimum
capital base for Tier 1 Unit MFBs was retained at n200 million, that of
Tier 2 MFBs was adjusted downward to N50 million. ALSO READ:
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the deadline for compliance, the CBN stated: “To aid the process of
recapitalisation, all MfBs shall be required to comply with the following:
Tier 1 MFBs shall meet a N100 million capital threshold by April 2020
and N200 million by April 2021. “Tier 2 Unit MFBs shall meet a N35
million capital threshold by April 2020 and N50 million by April 2021.
A State MFB shall increase its capitalisation to N500 million by 2020
and N1 billion by April 2021 and National MFB shall hold capital of
N3.5 billion by April 2020 and N5 billion by April 2021.” Some of the
operators, who spoke with Financial Vanguard, commended the CBN

for the review, saying it is a welcome development. Managing Director,
Infinity MfB, Mrs. Clara Oloniniyi, said the move by CBN shows that
the regulator gave the sub-sector a listening ear, saying: “ I think they
did well for reducing the capital base of Unit MfBs because we now
have tier one and tier two, which means that they have given everybody
the opportunity to remain in business. “This means that they don’t want
any MfB to close shop. The idea is good, kudos to them, even as a State
MfB, if you cannot cope, you can stay with tier one MfB. “This shows
that the CBN listened and worked on all our complaint and came out
with the new arrangement. This is a good development and even the
extension of the deadline to April 2021. With this new review, it shows
they listened to us. For me, I think they have done well. I am
impressed,” she said. Also, Head, Internal Control and Audit, Olive
Microfinance Bank Limited, Mr. Agbai Egbu, stated: The new
arrangement would create enabling an environment for the MfBs to
embark on a more robust business for customers and create more fund
for the subsector to do more businesses than before. “The new
arrangement also gave a soft landing by extension of the recapitalization
date from April 2020 to 2021,” he said. On his part, Managing Director,
Shomgom MfB, Mr. Richard Shehu, stated: “By the new structure, it
would be difficult for any MfB to go down. It is a welcome development
because it will allow the MfBs to remain in business,” he said.
Meanwhile, the latest circular that was signed by the Director, Financial
Policy and Regulation, Mr Kevin Amugo, the CBN said it reviewed the
capital base to aid the recapitalisation process and ensure continued
operations of microfinance banks in the rural, unbanked and
underbanked areas of the economy.

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