CBN to Raise Capital Base of Microfinance Banks

By Modupe Gbadeyanka

There are strong indications that Microfinance Banks (MfBs) operating in the country will have to increase their minimum capital requirement.

A report by Vanguard on Tuesday disclosed that the Central Bank of Nigeria (CBN) is working towards this, but was yet to unveil the new benchmarks for the MfBs.

At the moment, 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 National MfBs need N2 billion as minimum paid up capital to operate.

Quoting a source, Vanguard said the issue was discussed at the last Committee of MfBs meeting held in Lagos.

The raising of the capital base is aimed to enhance their performance and ensure the sector does not fall into crisis.

Quoting a chief executive of a Unit Microfinance Bank, the news journal operators have been duly informed on the development.

Over 80 percent of the more than 904 microfinance banks operating in Nigeria are Unit MfBs and a look at the economy showed that recession has affected the macro economy.

“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.