CEM REPORT, LAGOS
Central Bank of Nigeria (CBN) has extended the deadline April 2022 for Microfinance Banks (MfBs) to meet the new minimum capital requirement. This is in consideration of the impact of the COVID-19 pandemic
This was announcement in a circular, signed by Director, Financial Policy and Regulations department, Kelvin Amugo.
“The Central Bank of Nigeria in consideration of the impact of the coronavirus (COVID-19) pandemic on economic activities, has revised the deadlines for compliance with the minimum capital requirements for Microfinance Banks (MFBS) in Nigeria.”, CBN said
According to the circular, MFBs operating in rural, unbanked and under-banked areas (Tier 2) now have till April 2021 to meet the N35 million capital threshold and N50 million by April 2022.
MFBs operating in urban and high density banked areas (Tier 1) are expected to meet the N100 million capital threshold by April 2021 and N200 million by April 2022 while State MFBs shall increase their capital to N500 million by April 2021 and N1 billion by April 2022.
For National MFBs, they will have to meet the minimum capital of N3.5 by April 2021 and N5 billion by April 2022.
CBN had in March released a draft of the revised guidelines for Microfinance Banks in Nigeria, after previously announced in a notice in October 2018 of amendment to the 2012 guidelines.
[READ ALSO] Nigerian GDP real growth declined to 1.87% in Q1 2020
The Draft Revised Guidelines splits the Unit MFBs to Tier 1 and Tier 2 bringing the categories of MFBs to 4 (four) namely: Tier 1 Unit MFBs; Tier 2 Unit MFBs; State MFBs, and National MFBs
As summarized by further Africa, the benefit of this revision is that Unit MFBs would no longer be restricted to one location. Tier 1 Unit MFBs would be permitted to operate in urban areas and have up to 4 (four) branches in addition to the head office, within 5 (five) Local Governments Areas (LGA) in the state. Tier 2 Unit MFBs would be permitted to have a head office and a branch within the same LGA. Note that Tier 2 MFBs are to operate in rural and unbanked/underbanked areas.
It is also useful to note that the number of branches State and National MFBs may establish at commencement is capped at 10 under the Draft Revised Guidelines. In the 2012 Guidelines, this is not capped.
The capitalization requirement for each category of MFB in the Draft Revised Guidelines are as follows: Tier 1 Unit – 200 million Naira; Tier 2 Unit – 50 million Naira; State MFBs – 1 billion Naira; and National MFBs – 5 billion Naira.
The capitalization requirement for each category of MFB in the Draft Revised Guidelines are as follows: Tier 1 Unit – 200 million Naira; Tier 2 Unit – 50 million Naira; State MFBs – 1 billion Naira; and National MFBs – 5 billion Naira.
With this revision, MFBs would have the option to apply for a Tier 2 Unit MFB license with a share capital requirement of 50 million Naira as opposed to the 200 million Naira minimum capital requirement for Unit MFBs stated in the MFB capitalization review notice earlier issued in October 2018.
