CBN set new rules for non-interest MFBs

The Central Bank of Nigeria has released draft guidelines on the regulation and supervision of non-interest (Islamic) micro finance banks (MFBs) in the country.

A Non Interest (Islamic) Financial Institution (NIFI) means a bank under the purview of the CBN which transacts banking business engages in trading, investment and commercial activities and also provides financial products and services in accordance with the principles of Islamic Commercial Jurisprudence.

Similarly, a Non Interest (Islamic) Microfinance Bank (NIMFB) means any MFB licenced by the CBN to carry on the business of providing financial services, engages in trading, investment and commercial activities and also provides financial products and services as specified in Section two of the guidelines.

In the document posted on its website, the banking sector regulator placed the NIMFBs into three categories namely Unit, State and National.

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A Unit NIMFB is authorised to operate in one location. It shall be required to have a minimum paid-up capital of N20 million and is allowed to have only one branch outside the head office within the same Local Government Area subject to availability of free funds of at least N20 million and compliance with the prescribed minimum prudential requirements.

On the other hand, a State NIMFB is authorised to operate in one State or the Federal Capital Territory (FCT). It shall be required to have a minimum paid-up capital of N100 million and is allowed to open branches within the same state or the FCT, subject to the availability of free funds and the prior approval of the CBN for each new branch or cash centre.

Also, a National NIMFB is authorised to operate in all the states of the federation including the FCT. It shall be required to have a minimum paid-up capital of N2 billion, and is allowed to open branches in all states of the Federation and the FCT, subject to the availability of free funds and the prior approval of the CBN for each new branch or cash centre.

“The prescribed minimum capital requirement for each Category of NIMFB may be reviewed from time to time by the Central Bank of Nigeria.The role of MFBs in poverty reduction, increased access to financial services, contribution to financial stability and economic development has been established in Nigeria and around the globe,” the CBN added.