Ahead of next year’s deadline for microfinance banks to significantly raise their capital base, and poised to ensure that the move does not inadvertently kill operators across the nation’s rural areas, the Central Bank of Nigeria (CBN), on Monday announced a review of its October 22, 2018 circular.
The apex bank says there will now be two tiers of unit MFBs, with Tier one MFBs maintaining the minimum capital of N200m, while tier 2 operators now have N50m as minimum capital.
A timeline has also been set for the various operators to meet the set target, broken down into April 2020 and the final tranche one year later.
According to the earlier circular, state-wide operators were to increase theirs to N1bn; and national MFBs, N5bn.
The latest version dated March 7, 2019, titled “Re: Review of minimum capital requirement for microfinance banks in Nigeria,” the apex bank said in document signed by Kevin Amugo, Director, Financial Policy and Regulation Department at the CBN, is part of efforts to ensure continued “operations of microfinance banks in the rural, unbanked and under-banked areas of the economy.”
Explaining further, the circular added that Tier 1 unit MFBs shall operate in the urban and high-density banked areas of the society, while Tier 2 players will be restricted to the rural, unbanked or under-banked areas.
To ease the recapitalization process, the CBN requires all Tier 1 unit MFBs to meet a N100m capital threshold by April 2020 and N200m, exactly one year after.
In the case of Tier 2 MFBs, they are required to meet N35m capital threshold initially and N50m by April 2021.
State MFBs are to increase their capital initially to N500m by April next year, before graduating to N1bn by April 2021; just as national players must hold N3.5bn capital by April 2020 and N5bn in 2021.
A breakdown of the 902 operating MFBs across the country, according to the CBN list, 173 or 11.42% are Lagos based.