CBN Sets N50m Capital for Tier 2 Microfinance Banks

• CBN Sets N50m Capital for Tier 2 Microfinance Banks

The Central Bank of Nigeria has introduced a Tier-based system for unit microfinance banks in the country.

The apex bank also adjusted the time frame given to the different categories of microfinance banks to recapitalise.

The different categories are the unit, state and national operators.

In a circular to all microfinance banks released on Monday on the ‘Review of minimum capital requirement for microfinance banks in Nigeria,’ the CBN reviewed a circular it had earlier issued to the microfinance banks on October 22, 2018.

The CBN stated that the Tier 2 unit microfinance banks must have a minimum capital of N50m, while Tier 1 would maintain the N200m minimum capital introduced for unit microfinance banks in October 2018.

The circular read, “The Central Bank of Nigeria revised the categories of microfinance banks with a view to ensuring continued operations of microfinance banks in the rural, unbanked and underbanked areas of the economy.

“The unit microfinance banks shall comprise two Tiers: Tier 1 unit microfinance bank which shall operate in the urban and high-density banked areas of the society; and Tier 2 unit microfinance banks which shall operate only in the rural, unbanked or underbanked areas.”

Following the above, the CBN stated that the minimum capital requirement for the categories of microfinance banks had been revised.

It stated that Tier 1 unit microfinance banks must meet a N100m capital threshold by April 2020 and N200m by April 2021.

Tier 2 unit microfinance banks, it added, must meet a N35m capital threshold by April 2020 and N50m by April 2021.

The CBN stated that state microfinance banks must increase their capital to N500m by April 2020 and N1bn by April 2021.

A national microfinance bank must hold a capital of N3.5bn by April 2020 and N5bn by April 2021, it added.

Before the apex bank commenced the recapitalisation of the microfinance institutions in 2018, the minimum capital base for national microfinance banks was N2bn, state microfinance banks was N100m, while the unit microfinance banks had a minimum capital requirement of N20m.