There are indications that the Central Bank of Nigeria (CBN) is considering raising the capital requirement of Unit Microfinance Banks (MfBs) by 400 percent to N100 million from N20 million, BusinessDay investigation has revealed.
With this move, 893 MfBs with unit licenses out of 1,008 microfinance banks are expected to shore up their capital to N100 million or consolidate.
The CBN may also increase the capital base of State Microfinance Banks to N250 million from the current N100 million. There are about 107 MfBs with state licenses.
The microfinance policy framework specifies a Unit Microfinance Bank is authorised to operate in one location, with a minimum paid-up capital of N20 million and is prohibited from having branches and/or cash centres.
For a State Microfinance Bank, it is authorised to operate in one State or the Federal Capital Territory (FCT), with a minimum paid-up capital of N100 million and is allowed to open branches within the same State or the FCT, subject to prior written approval of the CBN for each new branch or cash centre.
A National Microfinance Bank is authorised to operate in more than one state, including the FCT, with a minimum paid-up capital of N2 billion, and is allowed to open branches in all states of the Federation and the FCT.
Raising capital was a major discussion at the last Committee of Microfinance Banks in Nigeria (COMBIN) held in conjunction with the CBN on May 2, 2018. At the meeting, the CBN directed the operators to go and plan and work towards meeting up the requirements but no deadline was given.
When contacted, Tokunbo Martins, director, Other Finance Institutions (OFIs) department, said the CBN has not come out with a pronouncement yet. “It is still being considered. When a decision is made, an adequate timeframe will be given”, Martins said.
When this happens, analysts said microfinance institutions with strong capital base would translate to good performance. “Depending on how much it is raised to, it would result to regulatory induced consolidation”, one of the operators told BusinessDay under anonymity.
Rogers Nwoke, president, National Association of Microfinance Banks (NAMB), confirmed that the CBN will review the capital base of MfBs but has not yet done so.
Nwoke expects the CBN to come up with exposure draft amendment, so that stakeholders can make input. Nwoke said the CBN should look at entire MfB model and define a Unit MfB in terms of those operating in the rural and urban areas. He expects total overhaul of MfBs guidelines.
Already, microfinance operators are engaging with institutional investors for funds to raise their capital. One of the Unit MFBs based in Abeokuta, which is planning to migrate to State license is offering N170 million for subscription to shore-up capital.
“We have been having series of meetings. Today (Wednesday) we have had three meetings with some operators of MfBs on raising capital”, Franklin Odoemenam, managing director, Fragg Investment Management limited told BusinessDay by phone.
Modupe Ladipo , chairman of Enhancing Financial Innovation and Access (EFInA), had in September 30, 2017 at an Accion Microfinance Bank Financial Inclusion Conference in Lagos, advised the CBN to raise capital requirements for microfinance banks to drive financial inclusion.