CBN warns Micro Finance Banks against non-permissible activities
The Central Bank of Nigeria (CBN) has warned Micro Finance Banks (MFBs) in the country against going beyond the remit of their operating licences by engaging in non-permissible activities, especially wholesale banking, foreign exchange transactions and others.
According to the CBN, given the comparatively low capitalization of Micro Finance Banks, dealing in wholesale and/or foreign exchange transactions are a significant risk with dire consequences for financial system stability.
In a circular issued by Ibrahim S. Tukur of the Financial Policy and Regulation Department, the CBN warned,
“MFBs are strictly prohibited from foreign exchange transactions.
“MFBs are to primarily focus on providing financial services to retail and micro-clients.
“Micro credit and retail transactions carried out by MFBs are limited to N500,000 per transaction for Tier 2 Unit MFBs and N1,000,000 for other categories.
“Micro credit facilities shall constitute a minimum of 80 percent of total loans portfolio for MFBs.”
The apex bank said it will continue to monitor developments in the MFB sector and reminded all Micro Finance Banks to strictly comply with the extant “Revised Regulatory and Supervisory Guidelines for Micro Finance Banks in Nigeria, 2012”.
The CBN said it will apply severe regulatory sanctions for breaches of extant regulations, including revoking the licence of non-compliant MFBs (in line with Section 19 of the Guidelines).
Amaka E. Nliam/ CBN
