THE CRACKDOWN ON MICROFINANCE BANKS
The microfinance sector deserves better attention
In line with Sections 12 and 13 of the Banks and Other Financial Institutions Act (BOFIA), 2020, the Central Bank of Nigeria (CBN) recently revoked the operating licences of 46 microfinance banks (MFBs), citing their failure to adhere to regulatory requirements. The curtains were drawn on the banks for being in breach of one or more operational provisions, including insufficient assets to meet liabilities, closure of operations without CBN approval, prolonged inactivity and cessation of financial intermediation. Some also had their licences revoked for failure to commence operations within 12 months of licence approval as well as inability to maintain minimum capital requirements.
Regulated by the CBN and the Nigeria Deposit Insurance Corporation (NDIC), the MFBs sector relies heavily on both unit and state microfinance banks. And in taking the latest decision, the apex bank’s motive is to save depositors and ensure sanity in the sector. However, beyond the adduced reasons for the hammer on the 46 banks, there is a deeper concern -the continuing mortality rate of operators in the sector. In May 2023, the CBN had carried out a similar revocation exercise when it axed no fewer than 132 microfinance banks, three finance companies and four primary mortgage banks.
