The Central Bank of Nigeria (CBN) is set to increase the minimum capital requirement for Microfinance Banks (MfBs) with a view to enhancing their performance.
Confirming this development to Vanguard on condition of anonymity, a player in the micro-finance sector said that the issue was raised at the last Committee of MfBs meeting, in Lagos, noting that the CBN has not made up its mind on the benchmark.
The source also disclosed that operators have been duly informed on the development aimed at enhancing performance in the subsector.
Recall that a Unit license MfB requires N20 million minimum paid up capital to operate; State MfBs license requires N100 million minimum paid up capital, while a National MfB requires N2 billion as minimum paid up capital.
The source noted that more than 80 percent of the over 904 MfBs in the country were Unit MfBs, adding, “If you look at the economy, the recession has affected the macro-economy and we are in a micro-economy. I don’t know how the shareholders of these Unit MfBs would survive the increase in capital.
“We have been encouraged that the Unit MfBs should enter into mergers, but I see this as a plea of marriage of strange fellows. The Unit MfBs were originally founded by people of like mind, but when it comes to mergers, there could be issues within. I am not too positive, but I am sure it may work, if it does, the better for the sub-sector.
“The subsector is going to face a serious challenge; there is going to be a shift in the existing shareholders fund of the banks. The CBN has not made up its mind on the benchmark, but we have been informed that there would be an increase in the shareholders fund.
“The CBN is looking at upward review of these, but my fear is this, out of about 904 MfBs in the country, is that the percentage of those in the Unit MfB section is more than 80 percent,” the source said.