CBN to hammer microfinance banks straying into wholesale banking

From Uche Usim, Abuja and Chinwendu Obienyi

The Central Bank of Nigeria (CBN) at the weekend warned all microfinance banks (MFBs) to stick to their approved operational parameters, warning those who advertently stray into wholesale banking to immediately desist from that or face unpalatable repercussions, including the revocation of their licences.

In a circular dated August 19 and titled “Cessation of non-permissible activities by microfinance banks”, Ibrahim Tukur of the Financial Policy and Regulations Department noted with concern that some MFBs were venturing into foreign exchange transactions which is totally outside their operational scope

The circular read: “CBN has observed the activities of some microfinance banks (MFBs) that have gone beyond the remit of their operating licenses by engaging in non-permissible activities especially wholesale banking, foreign exchange transactions and others.

“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 (the Guidelines).

“For the avoidance of doubt and consistent with the permissible activities of specialized micro institutions, MFBs are strictly prohibited from foreign exchange transactions; MFBs are to primarily focus on providing financial services to retail and/or micro clients; micro credit and retail transactions carried out by MFBs are limited to N500,000 per transaction for Tier 2 Unit MFBs and N1,000,000 for other categories and micro credit facilities shall constitute a minimum of 80 per cent of total loans portfolio for MFBs”.