CBN Unveils Tougher Sanctions for Microfinance Banks
By Dipo Olowookere
On Wednesday, the Central Bank of Nigeria (CBN) released a review of guidelines for the regulation and supervision of microfinance banks in the country.
In the draft document signed by the Director of Financial Policy and Regulation Department of the CBN, Mr Kevin Amugo, it was explained that this move was necessitated to reposition and strengthen MFBs towards improved performance, calling for comments within three weeks.
The apex bank said it reviewed the guidelines in exercise of the powers conferred on it by the Central Bank of Nigeria Act CAP C4 LFN 2010 and the Banks and Other Financial Institutions Act (BOFIA) CAP B3 LFN 2010.
It said the guideline covers categories of microfinance banks, ownership and licensing requirements, permissible and prohibited activities, funding, corporate governance, prudential and anti-money laundering requirements, amongst others.
The CBN said a microfinance bank can accept various types of deposits including savings, time, target and demand deposits from individuals, groups and associations; provide credit and housing micro loans to its customers as well as ancillary services such as capacity building on record keeping and small business management and safe custody.
It can also issue debentures to interested parties to raise funds from members of the public with the prior approval of the CBN and can also collect money or proceeds of banking instruments on behalf of its customers including clearing of cheques through correspondent banks.
However, an MFB cannot engage in foreign currency transactions, except foreign currency borrowings; international commercial papers; international corporate finance; international electronic funds transfer; clearing house activities; collect third party cheques and other instruments for the purpose of clearing through correspondent banks; deal in land for speculative purposes; deal in real estate except for its use as office accommodation; or provide any facility for speculative purposes.
The central bank also left the minimum capital requirement at N200 million for tier one unit MFB, N50 million for tier two unit, N1 billion for state MFB and N5 billion for national MFB.
For sanctions, the CBN said any MFB involved in activities outside the approved business shall pay N500,000 and then forfeit the estimated profit from the engagement.
It said the opening branch or cash office without the approval of the CBN shall attract N500,000, N1 billion and N2 billion per branch opened for a unit, state and national MFBs and the closure of such branch within a period of 30 days. It said failure to close the branch will attract N10,000 for each day of defult irrespective of the category of the MFB.
Read the full guidelines HERE