August 21, (THEWILL) – The Central Bank of Nigeria (CBN) says it will sanction microfinance banks (MfBs) found to be engaged in activities that are beyond their mandate of non-wholesale banking.
The CBN explained in a circular to all MfBs issued Thursday by its Policy and Regulation Department, and signed by Ibrahim S. Tukur, that some MfBs have gone beyond the remit of their operating licenses by engaging in non-permissible activities.
According to the apex financial sector regulator, such non-permissible areas are, especially, wholesale banking, foreign exchange transactions and others.
The CBN has therefore threatened to sanction MfBs that engage in such activities that are beyond the mandate of their operating licence.
It cited the significant risks involved due to the low capital base of such category of financial service firms: “Given the comparatively low capitalization of MfBs, dealing in wholesale and/or foreign exchange transactions are a significant risk with dire consequences for financial system stability.
“It has therefore become imperative to remind all MFBs to strictly comply with the extant revised regulatory and supervisory guidelines for microfinance banks in Nigeria 2012,” it said.
The apex also stated that micro-credit and retail transactions carried out by MFBs were limited to N500,000 per transaction for Tier 2 Unit MFB and N1 million for other categories.
According to the circular, the micro-credit facilities should constitute a minimum of 80 per cent of total loans for MFBs.
The bank threatened to revoke the licence of any MFBs that fails to comply.
This is coming after CBN in July stopped supplying Bureaux De Change operators forex, describing them as “agents that facilitate graft and corruption in the country”.
The apex bank now supplies forex to commercial banks for sales to individuals and businesses.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
