The Federal Inland Revenue Service (FIRS), the Nigerian government agency in charge of tax policy and collection, reportedly has revised the country’s tax laws to exempt microfinance banks (MFBs) from paying value-added tax (VAT) in an attempt to support the income of MFBs. Before the revision, MFBs were required to pay a five-percent VAT on income earned through transactions, investments and other services. Under the revised regulations, the money that would otherwise have been paid in taxes is expected to be used to fund additional loans to low-income clients.
According to a statement attributed to Mr Caleb Adewale Adeleke, the managing director of Lagos-based Corestep Microfinance Bank Limited, “we [Corestep Microfinance] appreciate the authorities for listening. With the exemption, our bank charges is [sic] reduced, which translates positively to our bottom-line.”
As of December 2012, microbanks in Nigeria reportedly had disbursed NGN 97 billion (USD 599 million) in loans to 5 million borrowers [1]. More recent figures are not available.
By Benjamin Krupp, Research Associate
Sources and Additional Resources
[1] Business Day: MFBs to Enjoy Sustained Revenue as FG Exempts Them from VAT
MicroCapital, July 11, 2014: National Insurance Commission (NAICOM) of Nigeria Approves Microinsurance Products from Mansard Insurance
MicroCapital, May 14, 2014: Central Bank of Nigeria Banks Debtors Owing More than $1.5m to Liquidated Banks from Seeking New Credit
MicroCapital, March 3, 2014: Central Bank of Nigeria Announces Closure of 83 Microfinance Banks (MFBs), Denies Shutdown of Additional 600 MFBs
MicroCapital, May 5, 2011: Central Bank of Nigeria Inspecting Microfinance Institutions with Provisional Licenses, Plans to Cut Number of Microbanks “Drastically”
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