New Nigerian National Microfinance Policy

The Central Bank of Nigeria unveiled its National Microfinance Policy Framework in December 2005. The policy framework aims to facilitate the provision of microfinance services on a long-term, sustainable basis to the poor. See “Microfinance Policy, Regulatory And Supervisory Framework For Nigeria.”

The National Microfinance Policy Framework creates a platform for the establishment of microfinance banks, improves the Central Bank of Nigeria’s (CBN) regulatory and supervisory capabilities, and provides appropriate tools for tracking the activities of microfinance-oriented development partners in Nigeria. In developing the Policy, the CBN reviewed recent microfinance activities in Nigeria and several other countries.

The Policy establishes two categories of Microfinance Banks (MFBs), namely,

» Microfinance Banks licensed to operate as unit banks, and
» Microfinance Banks (MFBs) licensed to operate throughout a state.

To address the imbalance of financial services in Nigeria and to achieve substantial growth in the sector, the Policy indicates that,

» MFBs licensed to operate as unit banks shall require a minimum paid-up capital of N20 million (US$156,000) per branch, and shall operate branches and/or cash centers within a particular community (Local Government Area).

» MFBs licensed to operate throughout a State shall require a minimum paid-up capital of N1.0 billion (US$7.84 million) per state, and shall operate multiple branches within a State, subject to the satisfaction of prudential requirements and the availability of funds for branch expansion.

The Policy also addresses the effects that this Policy will have on existing financial institutions, particularly those already providing financial services to the poor. For example, existing Community Banks must transform into Microfinance Banks by December 2007 by increasing their shareholders’ funds unimpaired by losses to a minimum of N20.0 million (US$156,000). Any community bank that does not meet the new capital requirement within the stipulated period shall cease to operate as a community bank.

The Central Bank of Nigeria will supervise and regulate the Microfinance Banks, and the Nigeria Deposit Insurance Corporation will insure their deposits. Microfinance Banks also will benefit from tax incentives and access to wholesale funds and refinancing facilities.