THE REQUIREMENTS FOR OBTAINING MICRO FINANCE BANK LICENCE IN NIGERIA

Obtaining a Microfinance Bank (MFB) license in Nigeria depends on the category of microfinance bank an investor seeks to operate.

7/20/2022 0 min read

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THE REQUIREMENTS FOR OBTAINING MICRO FINANCE BANK LICENCE IN NIGERIA

The Microfinance banking sector has experienced a lot of changes in recent times. Obtaining a Microfinance Bank (MFB) license in Nigeria depends on the category of microfinance bank an investor seeks to operate. Regulated by the Central Bank of Nigeria (CBN), setting up of a microfinance bank must be comply strictly with the principles provided for by the CBN.

There are three major categories of microfinance bank licenses in Nigeria. They are as follows:

1. UNIT MICROFINANCE BANK

The unit microfinance bank is made up of two tiers respectively;

Tier 1 Unit: N200,000,000 (Two Hundred Million Naira).

Teir 2 Unit: 50,000,000 (Fifty Million Naira)

This is a type of microfinance bank with authorization in one location. It is restricted from having any other branch. The minimum capital requirement for this category of MFB is N200,000,000 (Two Hundred Million Naira).

2. STATE MICROFINANCE BANK

A state microfinance bank can only within a one State in Nigeria or that of the Federal Capital Territory (FCT). The CBN through its written approval allows for the opening of various branches within that particular state, or within the Federal Capital Territory (FCT). However, a State Microfinance Bank is not allowed to open more than two branches within the same Local Government Area (LGA) unless it has established at least one branch or cash centre in every LGA of the State. The minimum capital requirement for this category of MFB is N1,000,000,000 (One Billion Naira).

3. NATIONAL/FEDERAL MICROFINANCE BANK

This category has more than one state authorization including the Federal Capital Territory (FCT). The CBN restricts their operation to not more than (10) branches. The minimum capital requirement for this category of MFB is N5,000,000,000 (Five Billion Naira).

THE PROCEDURE TO OBTINING MICRO FINANCE BANK LICENCE IN NIGERIA ARE AS FOLLOWS:

Prior to incorporation and applying for the licence, the proposed name of the company should be reserved at the Corporate Affairs Commission (CAC).

A formal application is made to the Governor of the Central Bank of Nigeria indicating the exact category of Microfinance Bank to be established. The application is accompanied by the following documents.

Non-refundable application fee of N50,000, N100,000 and N250,000 for Unit, State and National MFBs respectively in bank drafts or e-payment, in favour of the Central Bank of Nigeria;

  • The deposit of the minimum capital requirement for the relevant category of MFB, which shall be made through e-payment into the MFB Share Capital Deposit Escrow Account with the CBN. The capital deposited together with the accrued interest shall be released to the promoters after the grant of a license;

  • Satisfactory, verifiable and acceptable evidence of payment by the proposed shareholders of the minimum capital requirement for the category of the license being applied for; including a personal statement that capital does not originate from bank credit, any form of credit, questionable sources and any activity that relates to money laundering or any illicit activity;

  • Certificate of capital importation issued by an authorized dealer [banks] in the case of foreign capital;

  • A copy of a detailed feasibility report.

  • A copy of the draft Memorandum and Articles of Association.

  • A letter of intent to subscribe and pay for the shares of the proposed microfinance bank, which is to be signed by each subscriber.

  • List of promoters or proposed shareholders in a tabular form, showing their business and residential addresses, as well as the names and addresses of their bankers.

  • Particulars of the proposed board of directors.

BEFORE GRANTING A LICENSE THE CENTRAL BANK OF NIGERIA CONSIDERS THE FOLLOWING:

  • The promoters and the proposed management team are approved persons to invest in and manage the financial services industry in Nigeria by regulatory standards.

  • The promoters have submitted the names, curriculum vitae and credentials of the top management team of the proposed MFB.

  • The minimum paid-up capital of the shareholders’ funds of the relevant category being applied for is acceptable and the source is verifiable and found satisfactory to the CBN;

  • The quality of the management of the proposed MFB is sound.

  • The earnings prospect of the company is realizable.

  • The objects of the company as disclosed in its Memorandum and Articles of Association agree with the permissible activities listed.

If the application is successful, CBN will issue an Approval-In-Principle (AIP) to the applicant. The proposed MFB shall not incorporate/register its name with CAC until an AIP has been obtained from CBN in writing and a copy presented to Corporate Affairs Commission (CAC) for registration. If the AIP is granted, the applicant can go forward with incorporation of the MFB whose name was earlier reserved. It is worthy of note that the AIP does not mean the final license as it is merely required for the incorporation of the MFB at the Corporate Affairs Commission (CAC).

REQUIREMENT FOR GRANTING FINAL LICENSE

After the incorporation of the company, the promoters of the MFB not more than 6 months from the grant of the AIP will apply for a grant of final licence to the CBN, addressed to the Governor of the CBN. The application, along with other relevant documents should be accompanied with evidence of payment of the non-refundable licensing fee to the Central Bank of Nigeria.

PRE-LICENCING INSPECTION, COMMENCEMENT OF OPERATIONS AND POST-COMMENCEMENT REQUIREMENTS

Following the grant of a final operating license, the CBN conducts a physical inspection of the premises before the MFB can begin operations. Upon a satisfactory physical inspection of the premises, the CBN the CBN will inform the proposed MFB in writing on their readiness to commence operations. The MFB will also be required to comply with the post-commencement requirements provided in the MFB guidelines.

Finally, persons seeking to obtain a Microfinance Bank (MFB) license in Nigeria must exercise due diligence in ensuring that all the necessary guidelines are complied with.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

TEL: 08065553671, 08024230080