Microfinance Bank (MFB) 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.
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.
On 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.
