CBN Pegs Microfinance Banks Loan Per Transaction At N1m

The Central Bank of Nigeria (CBN) has pegged maximum loan limit
for Microfinance Banks (MfBs) at N1 million per transaction.

The apex bank gave this directive in a circular to all MfBs
titled: Cessation of non-permissible activities by MfBs”.

The MfB operators were also strictly prohibited from engaging in
foreign exchange transactions.

The CBN further directed the MfBs to primarily focus on
providing financial services to retail and/or micro clients,
microcredit and retail transactions not exceeding N500,000 per
transaction for tier 2 unit MFBs and N1 million for other
categories.

Also, micro credit facilities shall constitute a minimum of 80
per cent of total loans portfolio for MFBs.

The apex bank also warned MfBs to desist from offering
non-permissible activities, especially foreign exchange and
wholesale banking transactions.

The regulator noted that it observed that some MFBs are engaging
in non-permissible activities which pose risk to the financial
system.

The circular, which was signed by the Director of Financial
Policy and Regulation Department, Ibrahim Tukur, stated: “The
Central Bank of Nigeria (CBN) has observed the activities of some
MFBs that have gone beyond the remit of their operating licenses by
engaging in non-permissible activities, especially wholesale
banking, foreign exchange transactions and others.

“Given the comparatively low capitalization of MFBs, dealing in
wholesale and/or foreign exchange transactions are a significant
risk with dire consequences for financial system stability thus,
therefore, become imperative to remind all MFBs to strictly comply
with the extant Revised Regulatory and Supervisory Guidelines for
MFBs in Nigeria 2012 (the guidelines).

The CBN promised it will continue to monitor developments in the
MfB sector and apply severe regulatory sanctions for breaches of
extant regulations, including revoking the licence of non-compliant
MfBs.

The Central Bank of Nigeria (CBN) has pegged maximum loan limit
for Microfinance Banks (MfBs) at N1 million per transaction.

The apex bank gave this directive in a circular to all MfBs
titled: Cessation of non-permissible activities by MfBs”.

The MfB operators were also strictly prohibited from engaging in
foreign exchange transactions.

The CBN further directed the MfBs to primarily focus on
providing financial services to retail and/or micro clients,
microcredit and retail transactions not exceeding N500,000 per
transaction for tier 2 unit MFBs and N1 million for other
categories.

Also, micro credit facilities shall constitute a minimum of 80
per cent of total loans portfolio for MFBs.

The apex bank also warned MfBs to desist from offering
non-permissible activities, especially foreign exchange and
wholesale banking transactions.

The regulator noted that it observed that some MFBs are engaging
in non-permissible activities which pose risk to the financial
system.

The circular, which was signed by the Director of Financial
Policy and Regulation Department, Ibrahim Tukur, stated: “The
Central Bank of Nigeria (CBN) has observed the activities of some
MFBs that have gone beyond the remit of their operating licenses by
engaging in non-permissible activities, especially wholesale
banking, foreign exchange transactions and others.

“Given the comparatively low capitalization of MFBs, dealing in
wholesale and/or foreign exchange transactions are a significant
risk with dire consequences for financial system stability thus,
therefore, become imperative to remind all MFBs to strictly comply
with the extant Revised Regulatory and Supervisory Guidelines for
MFBs in Nigeria 2012 (the guidelines).

The CBN promised it will continue to monitor developments in the
MfB sector and apply severe regulatory sanctions for breaches of
extant regulations, including revoking the licence of non-compliant
MfBs.