Reps urge CBN to suspend recapitalisation of microfinance banks

The House of Representatives has urged the Central Bank of Nigeria (CBN) to suspend the planned recapitalisation for microfinance banks until the economy stabilises and considered safe.

The House mandated the Committee on Banking and Currency to interface with the CBN to find a workable solution to the challenges associated with recapitalisation of the banks and report back within four weeks for further legislative actions.

This followed a motion on the Urgent Need for the Central Bank of Nigeria (CBN) to Suspend the Deadline for Recapitalization of Microfinance Banks by Hon. Saidu Musa Abdullahi:

The House noted in October 2018, the CBN reviewed the minimum share capital requirement of the three categories of Microfinance Banks as follows: (a) Unit Microfinance Banks (MFBs) from N20 million to N200 million; (b) State Microfinance Banks (MFBs) from N100 million to N1 billion and (c) National MFB from N2 billion to N5 billion.

It also noted that on March 18, 2019, the CBN further reviewed the minimum capital requirements for MFBs, allowing for instalment payment and categorisation of Unit Microfinance into tiers 1 and 2, thus following the new capital requirement guideline.

The House noted tier 1 MFBs (Urban) are to pay N200 million as a minimum capital requirement while tier 2 (Rural) are to pay N50 million as against the initial N20 million requirement in 2018.

The lawmakers said they were aware of a survey conducted by the National Association of Microfinance Banks (NAMB), which indicated out of 874 licensed MFBs, about 612 may be negatively affected by the recapitalisation policy.

They said, according to findings, only 30 percent of MFBs will be able to meet the April 2021 timeline while 70 per cent are likely to be out of business with severe consequences for the financial services industry.

The House was concerned that the MFBs may not be able to meet up with the recapitalisation requirement of the CBN within the proposed time due to the adverse effects of COVID–19 pandemic and other economic realities.

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