Business and Economy

CBN revokes the operating license of 179 Microfinance Banks

Acting on its powers and to safeguard the banking public, the Central Bank of Nigeria, yesterday Tuesday May 23rd, revoked the operating license of 179 microfinance banks in the country

The revoked microfinance banks had, before the revocation, either seized operation or were constituting financial nuisance to the microfinance banking sector due to their continued inability to comply with laid down financial standards and regulations.

In a circular and gazette dated May 23rd and released by the CBN, the regulator listed the reasons for the license revocation as:

(a) ceased to carry on, in Nigeria, the type of business for which their licences were issued for a continuous period of 6 months ;
(b) failed to fulfil or comply with the conditions subject to which their licences were granted ; or
(c) failed to comply with the obligations imposed upon them by the Central Bank of Nigeria in accordance with the provisions of Banks and
Other Financial Institutions Act (BOFIA) 2020, Act No. 5.

The names of the 179 microfinance banks whose licenses are revoked are contained in two separate circulars and gazette both dated May 23, 2023. The first list contains a total of 132 microfinance banks while the second list contains the names of 47 microfinance banks, making a total of 179 revoked microfinance banking licenses.

The revoked microfinance banks include Zigate Microfinance Bank, Atlas Microfinance Bank, Mayfair Microfinance Bank, Cowries Microfinance Bank, Manny Microfinance Bank, Peniel Microfinance Bank, FCT Microfinance Bank, Moneywise Microfinance Bank, Prolific Microfinance Bank, Mainsail Microfinance Bank, Crossover Microfinance Bank, Bishopgate Microfinance Bank, Fadama farmers Microfinance Bank, Seed capital Microfinance bank and Network Microfinance Bank Limited, amongst others.

The list of the revoked microfinance banks can be found on the CBN website. Here is the link to the circulars revoking the license of 132 microfinance banks. Here is the link to the circular revoking 47 microfinance banks.

It would be recalled that in order to strengthen the microfinance banking subsector, the CBN had in 2020 increased the operating capital of microfinance banks in the country. In the new capital regime, tier-1 Unit microfinance banks were expected to have paid up share capital of N200 million unimpeded by losses, tier -2 Unit microfinance banks N50 million, State microfinance banks N1 billion and National microfinance banks N3.5 billion

The Central Bank required all the microfinance banks operating in the country to meet 50% of the new capital regime by April 2021 and 100% by April 2022. Many of the microfinance banks in the country avoided the CBN’s wrath by injecting fresh capital, capitalizing their profits, selling their banks to fund worthy investors or by taking up equity investments from their existing shareholders and from new share holders. Some others choose to downgrade to a unit microfinace bank or to a tier 2 microfinance bank.

Unfortunately, even after more than two years, the 179 revoked microfinance banks failed to meet up with the required capital and remained insolvent and incapacitated. They failed to follow any of the options suggested by the CBN to keep their banks afloat. Subsequently, the CBN decided to wield the big stick and send them out of the microfinance banking system.

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