CBN’s Axe Dangles on MFBs

Microfinance banks in the country have up to Monday next week that is December 31 to shore up their capital bases or risk being thrown out of business.

Central Bank of Nigeria (CBN) has microfinance banks into three categories, depending on their area of coverage.

 Those authorized to operate in one location must have a capital base of N20 million; and those allowed to operate in one state or the Federal Capital Territory (FCT) must have a capital base of N100 million; while N2 billion is required for those that are allowed to operate in more than one state, including the FCT.

These were contained in circular issued by the CBN in August titled, “Revised Microfinance Policy Regulatory and Supervisory Framework for Nigeria”.

Reminding the microfinance banks operators in a new circular titled, “Re: Circular on the Revised Microfinance Policy Regulatory and Supervisory Framework for Nigeria”, CBN said there would be no extension in the deadline.

O.A. Fabamwo,  CBN director, Other Financial Institutions Supervision Department said in the new circular that   “Appeals for a waiver, or reduction of penalty, or extension of compliance deadline will not be entertained”

Fabamwo said all MFBs that have elected to remain Unit MFBs are required to close any existing branches/cash centres, subject to prior approval of the CBN in writing and adequate notification to existing customers, who should be advised to migrate their accounts to the MFB’s Head Office, while dissenting customers should be settled.

Penalty for operating a branch/cash centre without prior approval of the CBN as stipulated in Section 13.1(b) of the Revised Guidelines for MFBs is N250,000 per branch for a Unit MFB, N500,000 per branch for a State MFB and N1,000,000 per branch for a National MFB.

Fabamwo said: “Such unapproved branched/cash centres shall be closed within thirty (30) days. Failure to close an unapproved branch or cash centre, shall attract a fine of N5,000 for each day of default, irrespective of the category of MFB.

“Moreover, failure to comply with any directive issued by the CBN, as stipulated in Section 19(i) of the Revised Guidelines for MFBs, is a ground for revocation of licence.” Fabamwo added.