House Urges CBN to Suspend Deadline for Recapitalisation of Microfinance Banks

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The House of Representatives has called on the Central Bank of Nigeria (CBN) to suspend the deadline for the planned recapitalisation programme of microfinance banks until the economy stabilises and is considered safe for a new deadline to be fixed.

It also 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 in Nigeria and report back within four weeks for further legislative action.

The resolution of the House was sequel to the adoption of a motion moved at the plenary yesterday by Hon. Saidu Abdullahi.

Moving the motion, Abdulahi recalled that in October 2018, the CBN reviewed the minimum share capital requirement of the three categories of microfinance banks.

He said the categories of Microfinance Banks are Unit Microfinance Banks (MFBs), from N20 million to N200 million; state Microfinance Banks (MFBs), from N100 Million to N1 Billion; and National MFB from N2 billion to N5 billion.

The lawmaker noted that on March 18, 2019, the CBN further reviewed the minimum capital requirements for the MFBs, allowing for installment payment and categorisation of unit microfinance into tiers one and two.

Abdulahi explained that in the new capital requirement guideline, 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.

He said in 2020, the CBN considered the impact of COVID–19 pandemics on the economy and therefore revised the timeline for compliance with the minimum capital requirement for the banks by a year, which would be due by the end of April 2021.

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Abdulahi stressed that a survey conducted by the National Association of Microfinance Banks (NAMB), which indicated that out of 874 licenced MFBs, about 612 may be negatively affected by the recapitalisation policy because only 30 per cent of MFBs would 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 lawmaker expressed concern that the microfinance banks may not be able to meet up with the recapitalisation requirement of the CBN within the proposed time due to the adverse effects of the COVID–19 pandemic and other economic realities.

Abdulahi said: “Worried that if the 612 microfinance banks, which is equivalent to 70 per cent of the entire Nigerian MFBs, with a workforce of about 44,800 staff, are shut down, it will aggravate unemployment, compound the challenges of insecurity, youth restiveness, poverty, apathy and hopelessness across the country.

“The CBN should suspend the planned recapitalisation programme until the economy is stabilised and considered safe for a new deadline to be fixed.”

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