February 6, 2018

CBN to increase minimum capital requirement for MfBs

CBN to increase minimum capital requirement for MfBs

Emefiele CBN Governor

By Providence Emmanuel

The Central Bank of Nigeria, CBN, is set to increase the minimum capital requirement for Microfinance Banks, MfBs with a view to enhancing their performance.

Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele

Confirming this development to Vanguard on condition of anonymity, Chief Executive officer of  a Unit MfB said that  the issue was raised at the last Committee of MfBs meeting in Lagos, noting that the CBN has not made up its mind on the benchmark.

The source also disclosed that operators have been duly informed on the development aimed at enhancing performance in the subsector.

Recall that a Unit license MfB requires N20 million minimum paid up capital to operate; State MfBs license requires N100 million minimum paid up capital to operate while a National MfB requires N2 billion as minimum paid up capital to operate.

The source noted that more than 80 percent of the over 904 MfBs in the country are Unit MfBs, adding, “If you look at the economy, the recession has affected the macro economy and we are in a micro economy, I don’t know how the shareholders of these Unit MfBs would survive the increase in capital.

“We have been encouraged that the Unit MfBs should enter into mergers, but I see this as a plea of marriage of strange fellows. The Unit MfBs were originally founded by people of like mind, but when it comes to mergers, there could be issues within. I am not too positive but I am sure it may work, if it does, the better for the subsector.

“In the New Year, the subsector is going to face a serious challenge, there is going to be a shift in the existing shareholders fund of the banks. The CBN has not made up its mind on the benchmark but we have been informed that there would be an increase in the shareholders fund. “In the Unit MfB, the benchmark is N20 million unimpaired by losses, for  state MfBs, the minimum bench mark is N100 million unimpaired by losses and for  national MfBs,  the minimum is N2 billion. CBN is looking at upward review of these but my fear is this, out of about 904 MfBs in the country, my fear is that the percentage of those in the Unit MfB section is more than 80 percent,” the source said.