Regulatory Alerts2013-01-03 | BSD/GL/MFBS/2013Revised Regulatory and Supervisory Guidelines For Microfinance Banks (MFBs) In Nigeria
The guidelines for the establishment of a Microfinance Bank (MFB) in Nigeria, as outlined by the Central Bank of Nigeria (CBN), emphasize simplicity, cost-effectiveness, and prudent financial management. The guidelines provide clear guidance on a variety of parameters including ownership structure, funding strategy, branch expansion, decision making hierarchy, manning level, staff training, credit administration, and more. Some key highlights include: 1. Ownership Structure: Majority shareholding should be held by indigenous Nigerians, while foreign shareholders can hold up to 40%. 2. Capital Adequacy Ratio: The minimum paid-up capital requirement is N5 million for State MFBs and N10 million for National MFBs. 3. Funding Strategy: Diversify funding base, avoid using depositors' funds for non-financial activities such as office construction or branch expansion. 4. Branch Expansion: Prior approval from CBN is required for opening new branches, and depositors' funds should not be used for this purpose. 5. Management Information System (MIS): Use a simple, robust MIS that complies with the requirements of eFASS/FINA. 6. Staff Training: Provide cost-effective, on-the-job training to staff. 7. Credit Administration: Regularly review and monitor loans and advances, conduct periodic field visits to clients. 8. Wide Outreach and Group Solidarity Model: Aim for wide outreach at low operational unit costs by leveraging group solidarity models. These guidelines emphasize the importance of financial stability, transparency, and adherence to best practices in the establishment and operation of MFBs in Nigeria. By following these guidelines, MFBs can contribute effectively to financial inclusion and the overall economic development of Nigeria.