The Central Bank of Nigeria (CBN) has directed microfinance banks that are operating in the rural areas not to overshoot its credit facility to customers beyond N500,000.
This was stated in a circular issued to all microfinance banks, titled “Cessation of Non-permissible Activities by Microfinance Bank dated August 19, 2011, and signed by Ibrahim Tukur, for the financial policies and regulations department of the CBN.
According to the apex bank, any microfinance bank caught flouting this instruction risk losing its licence.
The circular stated: “Microcredit and retail transactions carried out by MFBs are limited to N500,000 per transaction for Tier 2 Unit MFBs and N1,000,000 for Tier one”
On March 11, 2019, the CBN reviewed microfinance banks’ minimum capital requirements, allowing for instalment payments and categorisation of Unit Microfinance into two of Tier 1 and Tier 2.
According to the review, Tier 1 Unit Microfinance Banks operate in the urban and high-density banked areas of the society; and Tier 2 Unit Microfinance Banks operate only in the rural unbanked or underbanked areas.
Also, the CBN in its circular stated that microcredit facilities by MFB must constitute a minimum of 20 percent of the total loans portfolio of the banks.
The circular stated: “We observed the activities of some MFB that have gone beyond their operating limit, therefore it is imperative to remind all to strictly comply with the extant revised regulatory and supervisory guidelines for microfinance banks in Nigeria 2014.”