CBN Increases Capital Requirements For Micro Finance Banks By 900%

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CBN Increases Capital Requirements For Micro Finance Banks By 900%

The new minimum capital requirement takes immediate effect for new applications, while existing micro-finance banks will be required to fully comply with effect from the 1st of April, 2020.

Amugo noted that the new minimum capital requirement takes immediate effect for new applications while existing MFBs shall be required to fully comply with effect from April I, 2020.

The CBN has reviewed the state of health of the sub-sector and is of the view that microfinance banks, as presently constituted, would be unable to meet the critical targets set out in the Microfinance Policy, hence the need for specific reforms to strengthen the sub-sector and reposition microfinance banks towards improved performance.

“To meet these requirements, existing microfinance banks are expected to explore the possibility of mergers and acquisitions and/or direct injection of funds. 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,” the circular read.

The Central Bank of Nigeria has increased the capital requirements for micro-finance banks in the country by 900 percent.

#CBN releases Review of Minimum Capital Requirement for Microfinance banks in Nigeria https://t.co/mbiZq1Hcug

— Central Bank of Nigeria (@cenbank) October 24, 2018

100 Talks understands that the upward review of the requirements was made known by CBN in a circular to all MFBs in the country by its Director, Financial Policy and Regulation Department, Kevin Amugo, yesterday.

The CBN also said the move is to tackle the challenge of inadequate capital base in the sub-sector.

According to the Apex Bank, the minimum capital requirement for units and state micro-finance banks was raised to N200 million and N1 billion respectively.

  1. Yes, the performance of MFBs have not being up to standard. But to blame this majorly on inadequate capital requirements is misleading. The business environment is the major culprit in this case.

— Nedu Madiebo (@Pacman0000) October 23, 2018

National Micro-finance banks are also expected to raise N5 billion as minimum operating capital.

 

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