CBN REVIEWS MINIMUM CAPITAL REQUIREMENT FOR MICRO-FINANCE BANKS IN NIGERIA
Given the role of micro-finance banks in economic growth and development, the Central Bank of Nigeria (CBN) introduced the micro-finance Policy, Regulatory and Supervisory Framework on December 15, 2005 (revised in 2011). 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 micro-finance 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. The CBN has reviewed the state of health of the sub-sector and is of the view that micro-finance banks, as presently constituted, would be unable to meet the critical targets set out in the micro-finance Policy, hence the need for specific reforms to strengthen the sub-sectors and reposition micro-finance 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 micro-finance banks as follows:
1) Unit Micro-finance Bank N200,000,000 (Two hundred million Naira)
2) State Micro-finance Bank N1,000,000,000 (One billion Naira)
3) National Micro-finance Bank N5,000,000,000 (Five billion Naira)
To meet these requirements, existing micro-finance banks are expected to explore the possibility of mergers and acquisitions and/or direct injection of funds. The Revised Regulatory and Supervisory Guidelines for Micro-finance Banks, Code of Corporate Governance for Micro-finance Banks and sector-specific Prudential Guidelines for Micro-finance Banks would be issued in due course.
Institutions that meet the capital requirements as well as demonstrate 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 channels for micro funding activities of the CBN and the Development Bank of Nigeria.
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.