CBN Reviews Capitalisation Of Tier 2 Microfinance Banks

Akinkunmi Obakeye  
Updated March 19, 2019

CBN Reviews Capitalisation Of Tier 2 Microfinance Banks

 

The Central Bank of Nigeria (CBN) has reviewed the minimum capital base of Tier 2 Microfinance Banks (MFBs) across the country to N50m, informing them to recapitalise by April 2021.

The apex bank, however, maintained the capital base of Tier 1 for State and National Microfinance Banks earlier issued on October 22, 2018.

In a circular to all microfinance banks on Monday by the Director, CBN Finance Policy and Regulations, Mr Kevin Amugo, the financial regulator Tier 2 MfBs must meet a N35m capital threshold by April 2020 and N50m by April 2021.

“The Central Bank of Nigeria has revised the categories of microfinance banks with a view to ensuring continued operations of microfinance banks in the rural, unbanked and underbanked areas of the economy,” the CBN said.

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It explained further, “Accordingly, the unit microfinance banks shall comprise two Tiers: Tier 1-unit microfinance bank which shall operate in the urban and high-density banked areas of the society; and Tier 2-unit microfinance banks which shall operate only in the rural, unbanked or underbanked areas.

“Tier 1-unit microfinance banks must meet a N100m capital threshold by April 2020 and N200m by April 2021.”

The apex bank noted that the Tier 2-unit microfinance banks must meet a N35m capital threshold by April 2020 and N50m by April 2021.

According to it, state microfinance banks shall increase its capital to N500m by April 2020 and N1 billion by April 2021.

“A national microfinance bank shall hold a capital of N3.5 billion by April 2020 and N5 billion by April 2021,” it added.

The CBN had raised the minimum capital base of MFBs on October 22, 2018, explaining that the revision became inevitable as the sector had been contending with challenges such as inadequate capital base, weak corporate governance, and ineffective risk management practices, among others.