Recapitalization: CBN Approves 958 Micro-Finance Banks

The Central Bank of Nigeria (CBN) has announced that a total of 958  Micro-finance Banks (MFBs) were successful in scaling its recent recapitalization exercise, and are therefore now licensed to operate in the country. This figure is down from the over 1,200 operators that were previously in the business.

The new list of successful MFBs include those that met the N2bn capital base to operate with a national license, N100 million to operate with a state license, and those with N20million capital base to operate as a unit MFB.

In justifying the recapitalization exercise, the CBN accused the MFBs of engaging in illegal activities such as taking excessive loan risks and branching out too quickly, and against the provisions listed in their licenses.

According to the CBN, a unit MFB is authorized to operate only in one location, without any branches or cash centres, and is required to have a minimum paid up capital of N20 million. An operator with a state license may open branches within the state or the Federal Capital Territory, with a capital base of N100 million, while a national MFB license allows the operator to operate in more than one state, but with a paid up capital base of N2 billion.

According to a Financial Stability Report on the Micro-finance Bank sub-sector, signed by CBN Deputy Director, Financial Sector Stability, Dr. Joseph Nnanna, the recent re-capitalization of the MFBs brings the total paid-up capital and shareholders funds of the operators in that sector to N173.45 billion.