The National Association of Microfinance Banks (NAMB), a trade group of 820 microfinance banks (MFBs) in Nigeria, reportedly issued a statement calling for a deadline extension for the implementation of the revised Microfinance Policy Framework, the regulatory guidelines established in August 2011 by the Central Bank of Nigeria (CBN), the country’s apex bank. Under the new policy, MFBs are categorized based on minimum paid up capital. Banks that have capital of NGN 20 million (USD 130,000) to NGN 100 Million (USD 650,000) are classified as Unit MFBs, which according to the new law may not operate branch offices. Banks with minimum capital of NGN 100 million (USD 650,000) to NGN 2 billion (USD 13 million) are classified as State MFBs and may operate branches only in one state. MFBs with larger amounts of capital are classified as National MFBs and can open branches anywhere in the country.
All previous approvals for Unit MFB branches and cash centers are no longer valid, and MFBs are to close their additional offices and transfer all client accounts to their headquarters. State MFBs must also close any branches outside their designated state. Although the deadline to submit to these terms was December 31, 2012, it is reported that many banks have yet to comply. CBN reportedly stated that failure to comply with the new regulations is grounds for license revocation.
NAMB’s statement calls for an extension of the deadline to December 31, 2014, on the grounds that the sector remains in a tenuous position after the 2008 financial crisis and the CNB intervention in 2010, in which the CNB revoked the operating licenses of 224 MFBs due to high levels of nonperforming loans. Also, Branch offices have disbursed loans with tenures as long as 720 days, and closing these centers, NAMB argues, would lead to increased levels of bad debt and the destabilization of the industry. The extension will reportedly allow for the disbursal of donor funds that have already been paired to MFB branches, such as the Nigerian Incentive-based Risk Sharing Agricultural Lending (NIRSAL) fund, a CNB support fund for commercial lending in agriculture. The extra time will also allow for the implementation of the Rural Agricultural Programme, a government program intended to increase food production.
By Nicole Boyd, Research Associate
About Central Bank of Nigeria (CBN)
The Central Bank of Nigeria (CBN) was established in 1958 as Nigeria’s central banking authority. As defined by the act of parliament that created CBN, its statutory mandates are as follows: “to issue legal tender currency; to maintain external reserves; to safeguard the international value of the legal tender currency; to promote monetary stability and a sound financial system in Nigeria; and to act as banker and financial adviser to the Federal Government.” As of November 2012, CBN reports total assets of NGN 13.3 trillion (USD 82.4 billion).
About National Association of Microfinance Banks of Nigeria (NAMB)
The National Association of Microfinance Banks of Nigeria (NAMB) is a trade group of microfinance banks (MFBs) that merged with the Association of Microfinance Banks in Nigeria (AMBN) in 2009. As of April 2011, NAMB has 820 member MFBs. Its Lagos State Chapter has 180 members as of December 2011.
Sources and Additional Resources:
CBN. Revised Microfinance Policy Framework. http://www.cenbank.org/out/2011/pressrelease/gvd/revised%20microfinance%20policy%20july%2012%202011.pdf
CBN. December 17, 2012, Circular OFI/DIR/CIR/GEN/01/09 http://www.cenbank.org/out/2012/ccd/circular%20on%20compliance%20with%20the%20revised%20microfinance%20policy%20framework%20reminder.pdf
Punch. “Capital requirement: Microfinance banks call for deadline extension,” http://www.punchng.com/business/money/capital-requirement-microfinance-banks-call-for-deadline-extension/?utm_source=dlvr.it&utm_medium=twitter
MicroCapital. April 23, 2011, “MICROCAPITAL BRIEF: Central Bank of Nigeria (CBN) Governor Explains Delay in Microfinance Regulatory Framework,” https://www.microcapital.org/microcapital-brief-central-bank-of-nigeria-cbn-governor-explains-delay-in-microfinance-regulatory-framework/
MicroCapital. October 1, 2010, “MICROCAPITAL BRIEF: Central Bank of Nigeria Revokes Licenses of 224 Microfinance Banks,” https://www.microcapital.org/microcapital-brief-central-bank-of-nigeria-revokes-licenses-of-224-microfinance-banks/
MicroCapital. April 2, 2010, “MICROCAPITAL BRIEF: Central Bank of Nigeria (CBN) Developing a Framework to Regulate Microfinance Banking in the Country and Keep ‘Monsters’ Out of the Industry,” https://www.microcapital.org/microcapital-brief-central-bank-of-nigeria-cbn-developing-a-framework-to-regulate-microfinance-banking-in-the-country-and-keep-?monsters?-out-of-the-industry/
MicroCapital Universe Profile: National Association of Microfinance Banks of Nigeria (NAMB) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=National+Association+of+Microfinance+Banks+of+Nigeria+%28NAMB%29
MicroCapital Universe Profile: Central Bank of Nigeria (CBN) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Central+Bank+of+Nigeria+%28CBN%29
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