MFBs working to meet CBN’s deadline on capital requirement 
A stitch in time saves nine! You can call it an adage or a popular saying; it serves as a reminder to all directors and shareholders of microfinance that the earlier they comply with the Central Bank of Nigeria (CBN)’s deadline on categorisation, the better.
The implication is that it gives them timely opportunity to reposition so that investors, both foreign and local will know their status and be able to invest. It also enables the deposit money banks to assess their status and decide whether to accept them as corresponding bank.
The CBN in a circular released recently, gave all microfinance banks till December 31, 2012 to comply with the revised policy framework. The revised policy framework provides for three categories of microfinance banks and stipulated minimum capital requirements for each category.
Category one is a Unit Microfinance bank authorised to operate in one location and is prohibited from having branches/cash centres, while category two, a State Microfinance Bank is authorised to operate in one state or the Federal Capital Territory (FCT) and is allowed to open branches within the same state or the FCT, subject to prior written approval by the CBN for each new branch.
The third category is a National Microfinance Bank, authorised to operate in more than one State including the FCT and is allowed to open branches in all States of the Federation and the FCT but subject to prior written approval by the CBN.
In the circular signed by Olufemi Fabamwo, director, Other Financial Institutions and Supervision Department (OFID), CBN, new microfinance banks coming on board will naturally be required to meet the stipulated minimum capital requirement. But for existing microfinance banks, the interpretation of the minimum capital requirement shall be shareholders’ fund unimpaired by losses.
Responding to the development, Olufemi Babajide, chairman, National Association of Microfinance Banks (NAMB) Lagos chapter said microfinance banks are taking position toward meeting the CBN’s deadline. “We are working toward that. Microfinance banks are taking position. There is still time, no microfinance bank will be able to meet the deadline. We are not desperate. We are not afraid.”
To Lanre Abiola, managing director, Gold Microfinance Bank Limited, Lagos, operators will meet up because there is enough time.
The circular states that the existing microfinance banks will require some time to raise additional capital, where necessary or to restructure their operation to conform to the revised policy framework.
This is because many of the microfinance banks that currently operate as unit microfinance banks under the former policy framework also have existing approved branches cash centres which would require that they either transform to state microfinance banks under the revised policy framework or rationales those branches subject to the CBN approval.
The CBN gave microfinance banks three options to comply with the revised policy guideline. One option is to raise fresh capital to bring the capital base to the stipulated minimum of N100 million shareholders’ fund unimpaired by losses, to become a state microfinance bank under revised framework.
The second option is to obtain regulatory approval of the CBN to close all existing branches and cash centres and remain a Unit microfinance bank with a minimum capital requirement of N20 million shareholders funds unimpaired by losses, while the third option was to embark on mergers and acquisition such that the consolidated capital base of the combined institutions meets the stipulated capital requirement of a state or national microfinance bank.
