Microfinance Banks have received new revised supervisory and regulatory guidelines from the Central Bank of Nigeria (CBN) that increase their minimum capital and stipulate sanctions for banks that divest from their approved business.
The revised supervisory and regulatory guidelines stipulate that any bank that operates outside its approved business would be fined the sum of N500,000 and such will forfeit its estimated profit.
Also, before any Microfinance Bank restructures or performs any reorganisation, it must receive the CBN’s approval or risk N500,000 fine.
On the issue of capital base, the CBN maintained the minimum capital for a unit Tier 1 Microfinance Bank at N200 million, stating that by April 2020, the Tier 1 must have an N100 million capital threshold and by April 2021, the capital threshold must be N200 million.
Also, CBN 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 N50 million, but this year, by April 2020, the capital threshold should be N35 million.
For the state-based Microfinance Banks, the CBN said their capital by April 2020 should be N500 million and N1 billion by April 2021, but for national microfinance banks, by April 2020, they must have a capital of N3.5 billion and N5 billion by April 2021.
The last time such recapitalisation occurred for Microfinance Banks was in 2018 when the minimum capital base for national microfinance banks was N2 billion; N100 million for state microfinance banks, while the unit microfinance banks had a minimum capital requirement of N20 million.
According to the CBN, the changes were made to improve the performance of the Microfinance Bank in the financial industry.
“The need to reposition and strengthen MFB towards improved performance had become apparent as revealed from the report of a recent review of the subsector.
“Accordingly, the 2012 guidelines have been reviewed to strengthen and complement other on-going reform in the MFB sector. An exposure draft of the review guidelines is hereby issued for comments and observations.”