A study conducted by the National Association of Microfinance Banks (NAMB) shows that only 30 percent of microfinance banks will be able to meet the deadline for recapitalization.
The Central Banks of Nigeria (CBN) had in 2019 given microfinance banks operating in Nigeria a deadline to meet a specific minimum capital threshold in order to remain in business.
A deadline of April 2020 was given to the banks but was later reviewed this year due to the impact of the COVID-19 pandemic on businesses.
The minimum capital requirement, according to the financial regulator, will ensure continued operations of the banks in rural, unbanked, and underbanked areas of the economy.
The CBN maintained the minimum capital for a unit Tier 1 Microfinance Bank at N200 million, stating that by April 2021, Tier 1 must have an N100 million capital threshold, and by April 2022, the capital threshold must be N200 million.
Also, the apex bank increased the capital base for Tier 2 unit Microfinance Bank to N50 million.
This means, by April 2021, the Tier 2 unit firms must have a capital threshold of N35 million and by April 2022, the capital threshold must have grown to N50 million.
Also, state licenced MFBs are to increase their capital to N500 million by April 2021 and N1 billion by April 2022.
According to the revised guidelines, national MFBs are expected to have N3.5 billion minimum capital by April 2021 and N65 billion by April 2022.
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The Chairman of NAMB, Lagos Chapter, Mr. Taiwo Joda, in an interview recently urged the government to consider extending the milestones of achieving a specific amount of capital base to four years instead of two years.
According to him, the pandemic has affected loan recovery as well as an investment while merger and acquisition plans have stalled.
He said, “We may need to push it to 2024 with milestones for every year. So, rather than have it in two years, you can extend it to three years. Because where we were in 2019 is not where we are now and it is not going to be where would be in December.
“Again, a lot of discussion on recapitalisation and injection of fresh capital from investors have stalled because of the pandemic. Therefore, you cannot make any reasonable progress.”
“People who would want to give money to recapitalise and those who want to discuss mergers and acquisition would be cautious and would be looking at the books of banks to know how the pandemic has affected them.”