Microfinance banks’ assets hit N856.3bn on recapitalisation

The total assets of the microfinance banks rose by N97.32bn from N758.98bn as of the end of July 2020 to N856.3bn as of the end of September 2020 as the firms move to achieve their recapitalisation requirements.

This was contained in a report by the Central Bank of Nigeria on ‘Microfinance banks’ account (2SR) Assets’ quarterly bulletin obtained by our correspondent on Wednesday.

According to the report, the figure stood at N819.77bn as of the end of August.

In April 2020, the CBN in consideration of the impact of the COVID-19 pandemic on economic activities revised the deadline for compliance with the minimum capital requirements for microfinance banks in Nigeria.

The banking regulator communicated this in a circular with reference number FPR/DlR/GEN/ClR/07/054 entitled ‘Re: Review of minimum capital requirements for microfinance banks in Nigeria’.

Part of the circular read, “The Central Bank of Nigeria has extended the deadlines for compliance with the revised minimum capital requirements for all categories of the MFBs by one year as follows:

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“The MFBs operating in rural, unbanked and under-banked areas (Tier two) shall meet the N35m capital threshold by April 2021 and N50m by April 2022.

“The MFBs operating in urban and high density banked areas (Tier one) are expected to meet the NI00m capital threshold by April 2021 and N200m by April 2022.

“State MFBs shall increase their capital to N500m by April 2021 and N1bn by April 2022.

“And national MFBs are expected to meet minimum capital of N3.5bn capital by April 2021 and N5bn by April 2022.”

Before the apex bank commenced the recapitalisation of the microfinance institutions in 2018, the minimum capital base for national microfinance banks was N2bn; state microfinance banks had N100m; while the unit microfinance banks had a minimum capital requirement of N20m.

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While some MfBs had declared they had been able to raise their capital above the required level, acquisitions have also been taking place in the sector.

The Managing Director, DavoDani Microfinance Bank Limited, Simeon Ohwofa, said in line with the CBN’s directive to all microfinance banks in Nigeria to meet their various capitalisation requirements, the MfB had achieved and surpassed its capital requirements of N500m.

Also, DLM Capital Group, a developmental investment bank recently announced its acquisition of Links Microfinance Bank.

A report by Agusto & Co. recently released said the inability of some microfinance banks to meet the new capital requirements of the CBN before the recapitalisation deadline may lead to a decline in the number of MfBs in the country by 400.

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Agusto & Co. stated this in a report titled ‘The COVID-19 pandemic-induced accelerated digital transformation may have a limited impact in the microfinance industry in Nigeria – Agusto & Co’.

“The two phased increase in the minimum capital requirements for all categories of microfinance banks to take effect in April 2021 and April 2022 is expected to lead to a reduction in the number of operators from more than 900 to around 500 through consolidation activities as well as failures to meet the new requirements,” it stated.

According to the report, many microfinance banks in Nigeria, like in most developing countries with relatively low penetration of e-channels, witnessed a doubling of obligations that were past due for up to 30 days during the first wave of the pandemic and lockdown restrictions in early 2020.


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