By Amaka Abayomi

Operators in the microfinance sector have hailed the Central Bank of Nigeria (CBN) for reviewing the operational policy framework of microfinance banks (MFBs), saying the revised policy is more workable and would boost their operations.

The CBN, had, at its 402nd Board of Directors (BOD) meeting on 29th April, 2011, considered and approved the revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria with the aim of curtailing the mission drift of most operators.

The CBN had promised to release the revised policy framework before the end of 2nd quarter 2010, but could not as it had to consult concerned stakeholders like MFBs, deposit money banks, federal, states and local government agencies, development partners, NGOs, amongst others to ensure that it comes out with a workable policy.

Launched in 2005, the microfinance policy empowered licensed MFBs to provide financial services to 65 per cent of the population that were financially excluded.

Though MFBs’ outreach increased from 35 per cent to 53.7 per cent, but most MFBs experienced mission drift by operating like mini-commercial banks with poor corporate governance and with credit lines drying up, the apex bank had to intervene which led to the liquidation of 103 MFBs while 121others are still on probation,

But one section of the reviewed policy that operators have expressed delight over is the section that borders on capital requirement for the different categories of MFB.

For the Executive Secretary of the National Association of Microfinance Banks, Alhaji Kabir Yar’Adua, the downward review in the capitalization for state MFBs from N1 billion to N100 million would ensure that more people enjoy financial services.

“The reduction is a good thing as it would boost our operations by giving room for more players to come in, thereby, increasing financial inclusion while reducing poverty at the same time.”

Agreeing with Yar’Adua, the Managing Director of Havilah MFB, Mr. Rufus Oluyole, says the review would give room for continuity.

“The revised policy is more workable and the good thing about it is that it gives room for continuity as the capital requirement for unit MFBs is still N20m, while that of state MFBs has reduced from N1bn to N100m.

“Since the sector is private driven, it would allow more people to participate and ensure that more people enjoy financial services.”

Section 4.4.1 of the revised policy sub-titled Microfinance Bank Categorization reads “Microfinance Banks shall be required to be adequately capitalized, technically sound, and oriented towards lending based on cash flow and the character of clients. There shall be three categories of Microfinance Banks (MFBs).

4.4.1.1 Category 1: Unit Microfinance Bank

A Unit Microfinance Bank is authorized to operate in one location. It shall be required to have a minimum paid up capital of N20 million and is prohibited from having branches/cash centres.

4.4.1.2 Category 2: State Microfinance Bank

A State Microfinance Bank is authorized to operate in one State or the Federal Capital Territory (FCT). It shall be required to have 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 by the CBN for each new branch.

4.4.1.3 Category 3: National Microfinance Bank

A National Microfinance Bank is authorized to operate in more than one State including the FCT. It shall be required to have a minimum paid up capital of N2 billion and is allowed to open branches in all States of the Federation and the FCT, although, subject to prior written approval by the CBN.

4.4.1.4 Transformation Path

i. A Unit MFB that intends to transform to a State MFB shall be required to surrender its licence and obtain a State MFB licence, subject to fulfilling stipulated requirements.

ii. A State MFB that intends to transform to a National MFB must have at least 5 branches which are spread across the Local Government Areas in the State. This is to ensure that the MFB has gained experience necessary to manage a National MFB. It shall also be required to surrender its license and fulfill other stipulated requirements.

The prescribed minimum capital requirement for each Category of MFB may be reviewed from time to time by the Central Bank of Nigeria.”