By Tony Obiechina, ABUJA                          The Central Bank of Nigeria (CBN) has raised the minimum capital base of microfinance banks (MFBs) in the country to N5 billion giving them up to April 2020 to recapitalise.

This was contained in circular signed and issued by the CBN Director of Financial Policy and Regulation Department, Kevin Amugo in Abuja.
According to the circular while the minimum capital base of National MFBs was increased to N5 billion, that of state was increased to N1 billion and Unit MFBs, N200 million.
Prior to the circular, the minimum capital base for national MFBs was N2 billion while state MFBs were then required to have N100 million. Also, Unit MFBs previously had N20 million minimum capital requirement.
The CBN said the move became inevitable as the sector had been contending with challenges such as inadequate capital base, weak corporate governance, ineffective risk management practices, dearth of requisite capacity and mission drift.
The circular said “Given the role of microfinance banks in economic growth and development, the CBN introduced the Microfinance Policy, Regulatory and Supervisory Framework on December 15, 2005 (revised in 201 l).
“The key focus of the policy was among others, to increase financial inclusion rate in the country: improve access to financial services for the active rural poor; and pursue poverty eradication. The banking sector regulator said having reviewed the state of health of the sub-sector, found out that microfinance banks as presently constituted, would be unable to meet the critical targets set out in the microfinance policy, hence the need for specific reforms to strengthen the sub-sector and reposition it for improved performance.
“Consequently, the CBN, in exercise of the powers conferred on it by the Banks and Other Financial Institutions Act and in furtherance of its mandate to promote a sound financial system in Nigeria, hereby increases the minimum capital requirement of microfinance banks.
 “To meet these requirements, existing microfinance banks are expected to explore the possibility of mergers and acquisitions and/or direct injection of funds.
“The Revised Regulatory and Supervisory Guidelines for Microfinance Banks, Code of Corporate Governance for Microfinance Banks and sector specific Prudential Guidelines for Microfinance Banks would be issued in due course.
“Institutions that meet the capital requirements as well as demonstrate the existence of strong corporate governance in their operations would be allowed to open account at the CBN office within their state of operation. Such institutions would also be channels for micro funding activities at the CBN and the Development Bank of Nigeria,” it added.