By PROVIDENCE OBUH

The December 31st 2012 deadline for all microfinace banks  (MFBs) operating in the country  to recapitalize expires, with the possibility of  sanctions by the Central Bank of Nigeria (CBN).

The apex bank had in August 2011 classified MFBs into three categories, Unit, State and National MFBs, directing them to increase their capitalization base.

The new guidelines stipulate that those under the Unit category will have a minimum paid-up capital of N20, 000, 000, those that will apply for State will have a paid-up capital base of N100, 000,000, while those for National will have a paid-up capital of N2, 000,000,000 capital bases.

Subsequent to the revised policy framework released by the CBN, a Unit MFB is authorised to operate only in one location and is prohibited from having branches/cash centres, while a State MFB 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, while the National MFB is authorised to operate in more than one state including the FCT, and is allowed to open branches in all the states of the federation and the FCT, but subject to prior written approval by the CBN.

“A Unit MFB intending to convert into a State MFB is required to surrender its licence and obtain a State MFB licence, subject to fulfilling stipulated requirements, for a State MFB transiting into a National MFB, it must have at least five branches spread across the local government areas in the state,” the CBN explained adding that idea is to ensure that the MFB has gained experience necessary to manage a National MFB.

CBN Gov, Sanusi Lamido

CBN goes tough on recapitalisation deadline
The CBN in a circular released penultimate week ordered MFBs to close all unauthorised branches nationwide while reminding all directors and shareholders of all Microfinance Banks on the December 31, 2012 deadline for compliance with the Revised Microfinance Policy Framework (RMPF), particularly in respect of the capital requirements for each category of MFBs and existing branches/cash centres.

In the circular, the CBN insisted it will not entertain extension of deadline or accept any appeal for a waiver, or reduction of penalty for Microfinance Banks (MFBs) and Primary Mortgage Banks (PMBs) that fail to meet up with their recapitalisation this month.

The apex bank warned that failure to adhere to the instruction would attract fine ranging from N250, 000 to N1, 000,000.

Part of the circular signed by CBN Director, Other Financial Institutions Supervision Deptartment (OFISD), O. A. Fabamwo stated that MFB with offices outside their jurisdiction should be closed with immediate effect and their customers moved to their head offices or another office as the case may be.

Accordingly, Fabamwo said, “For the avoidance of doubt, all ‘customer interaction centres’, ‘meeting points’ and ‘customer service centres’, or similar outlets, once located outside the registered business premises of a unit MFB shall be regarded as unauthorised/unapproved branches/cash centres.

“All previous approvals for such outlets for unit MFBs have become null and void from the date of approval of the revised policy framework by the Board of Directors of the CBN.

“It is also pertinent to remind you that the penalty for operating a branch/cash centre without prior approval of the CBN as stipulated in Section 13.1(b) of the revised guidelines for MFBs is N250,000 per branch for a unit MFB, N500,000 per branch for a state MFB and N1,000,000 per branch for a national MFB.

“Failure to close an unapproved branch or cash centre, shall attract a fine of N5, 000 for each day of default, irrespective of the category of MFB. Moreover, failure to comply with any directive issued by the CBN, as stipulated in Section 19(i) of the revised guidelines for MFBs, is a ground for revocation of licence,” OFSID Boss said maintaining that unapproved branches/cash centres would be closed within 30 days.

Primary Mortgage Banks (PMB)
Also the CBN has prescribed a capital requirement of N5 billion for national Primary Mortgage Banks (PMBs) and N2.5 billion for state PMBs and they are expected to comply by April 30, 2013.

In a circular entitled: “Revised guidelines for Primary Mortgage Banks (PMBs),” the apex bank reminded PMBs’ directors and shareholders that they were required to have pre-merger consent by January 15, 2013, approval in principle on or before February 28, 2013 and final approval by March 31, 2013.

It sets recapitalisation options of capital raising through rights issue; private placement and public offer; business combination; mergers and acquisition, through takeover and downscaling, stressing that in choosing or implementing any of the options, they are required to conduct due diligence and seek professional legal and financial advice.

For capital raising, the CBN said PMBs that might choose to undertake rights issue, private placement, or public offer, were to complete the process and submit the documentary requirements for verification on or before March 31, 2013.

“This is to allow enough time for the capital verification exercise and subsequent correction of any discrepancy and or submission of any additional evidence that might be required, to ensure that the capital is verified, confirmed and approved before the stipulated deadline of April 30, 2013,” CBN stated.

Operators’ views
For Kingsolomon Microfiance Bank (KSF) operating under the Unit categorization, it has no plans of becoming a State or National MFBs.

Chairman, Board of Directors of the bank, Mrs. Angela Adegboyega told Vanguard, “Hence we have not exhausted Lagos population as a Unit MFB, we do not have plans to Convert.

We want to ensure that we completely fulfill our vision as a unit bank before converting to State,” she said adding “We started with 20, 000, 000 today our capital base is about N90, 000, 000 as a unit MFB.”

Also Managing Director, Ospoly Microfinance bank limited Osun State, Mr. Femi Fapohunda said plans are underway to shore up its capital base to N100 million in order to obtain a State licence.