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MFBs contemplate on the N10bn national licence ahead of CBN’s new capital requirement

CBN

Ahead of the full implementation of the new capital requirement for Microfinance Banks (MFBs) next year, the National Association of Microfinance Banks (NAMB) is planning to float a National MFB licence with N10 billion capital base.

The move is to absorb those MFBs who may not meet the new capital requirement announced by the Central Bank of Nigeria (CBN).

“As soon as we set up the National MFB, we will list it on the Nigerian Stock Exchange (NSE) before the end of the year,” Rogers Nwoke, president of NAMB, told BusinessDay exclusively.

Nwoke said his team was at the NSE last week for a closing bell ceremony where he discussed with the Exchange on how the members of NAMB could come to the market.

But the move by NAMB may also have been informed by the plan by the CBN and the Bankers Committee to establish a National MFB across the 774 local government areas of the country using Nigerian Postal Service (NIPOST) facilities.

According to the National MFB establishment plan by the CBN and the Bankers Committee, the two bodies will utilise the sum of N5 billion as equity from N60 billion Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS) Fund, while NIPOST will contribute its offices across the country.

The CBN in October 2018 increased the minimum capital requirements for Unit microfinance banks from N20 million to N200 million, State MFBs from N100 million to N1 billion, and National MFBs from N2 billion to N5 billion.

The new minimum capital requirement was to take immediate effect for new applications while existing microfinance banks were required to fully comply with effect from April 1, 2020, according to CBN’s directive.

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But MFB operators have been raising concern over the new capital requirement, saying it would be difficult if not impossible for many MFBs to meet.

Nwoke told BusinessDay that the existing 886 microfinance banks operating in the country have a capital base of N93 billion.

When contacted, Tokunbo Martins, director, Other Financial Institutions (OFIs) department, CBN, described the move by NAMB as “fantastic”.

Microfinance bank operators had protested the increase in their capital requirement and had written to the CBN for review of the new capital base and extension of deadline.

“We have taken all their requests on board and we are going to look at it,” Martins said.
The CBN had directed that to meet the new capital requirements, existing microfinance banks are expected to explore the possibility of mergers and acquisitions and/or direct injection of funds.

Also, the regulators said the Revised Regulatory and Supervisory Guidelines for Microfinance Banks, Code of Corporate Governance for Microfinance Banks and sector-specific Prudential Guidelines for Microfinance Banks would be issued in due course.

Institutions that meet the capital requirements as well as demonstrate the existence of strong corporate governance in their operations, the apex bank said, would be allowed to open account at the CBN office within their state of operation. Such institutions would also be channels for micro funding activities of the CBN and the Development Bank of Nigeria.

 

Source: Business Day

 

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