With less than a month to the new capital base for microfinance banks in Nigeria, the Central Bank of Nigeria has released an exposure draft guideline for the regulation and supervision of the subsector to reflect the new categories.

The apex bank had set April 1, 2020, as deadline for MFBs to meet the first stage of the new minimum capital base. CBN Director, Financial Policy and Regulation, Kevin Amugo in a circular released yesterday said the need to reposition and strengthen MFBs towards improved performance had become apparent as revealed from the report of a recent review of the subsector.

Accordingly, the circular said “the 2012 Guidelines have been reviewed to strengthen and complement other on-going reform in the MFB subsector.” The guideline for regulation and supervision of MFBs had last been reviewed in 2013.

Under the new capital base structure, the CBN had categorized MFBs into four as against the three, Unit, State and National contained in the 2012 Guideline. With the new capital base which takes effect from next month, MFBs will be categorized into Tier1 Unit, Tier 2 Unit, State and National.

The CBN had in 2018 reviewed the capital base of MFBs raising that of unit MFBs from N20 million to N50 million for Tier 2 and N200 million for Tier 1 MFBs. The two categories are expected to meet N35 million and N100 million capital base by the first day of next month.

Also, the capital base of state MFBs had been raised from N100 million to N1 billion by 2021 and they are expected to have N500 million capital base by April 1, 2020, while the National MFBs are expected to have N3.5 billion by next month and shore it up to N5 billion by April 2021 from a previous requirement of N2 billion.

According to the draft guideline released yesterday, Tier 1 Unit MFB “shall operate in the banked and high-density areas, and is allowed to open not more than four branches outside the head office within five contiguous Local Governments Areas, subject to the approval of the CBN.”

Also, “Tier 2 Unit MFB with rural authorization shall operate only in the rural, unbanked or underbanked areas, and is allowed to open one branch outside the head office within the same Local Government Area subject to the approval of the CBN.

“State Microfinance Bank is authorized to operate in one state or the Federal Capital Territory (FCT). It is allowed to open branches within the same State or the FCT, subject to the prior written approval of the CBN for each new branch or cash centre. It shall not be permitted to open more than two branches in the same Local Government Area (LGA) unless it has established at least one branch or cash centre in every LGA of the State.  A newly licensed State MFB shall not commence operations with more than 10 branches.