CBN pegs loan limit for rural microfinance banks at N500,000

The Central Bank of Nigeria (CBN) has instructed microfinance banks operating in the rural areas not to exceed its credit facility to customers beyond N500,000.

This was stated in a circular to all microfinance banks, titled “Cessation of Non-permissible Activities by Microfinance Bank dated August 19, 2011 and signed by Ibrahim Tukur, for the financial polier and regulations department of the CBN.

According to CBN, those caught flouting this instruction risk losing their licence.

“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 Tier one”

On March 11, 2019, the CBN reviewed the minimum capital requirements for microfinance banks, allowing for instalment payments and categorisation of Unit Microfinance into two of Tier 1 and Tier 2.

The review states that Tier 1 Unit Microfinance Bank, operates in the urban and high-density banked areas of the society; and Tier 2 Unit Microfinance Bank, operates only in the rural unbanked or underbanked areas.

CBN also in its circular stated that micro credit facilities by MFB must constitute a minimum of 20 percent of total loans portfolio of the banks.

“We observed the activities of some MFB that have gone beyond their operating limit, therefore it is imperative to remind all to strictly comply with the extant revised regulatory and supervisory guidelines for microfinance banks in Nigeria 2014,” the circular stated.

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