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Central Bank of Nigeria Approves 8 Microfinance Institutions

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Abuja, Nigeria. August, 22 2006 - The Central Bank of Nigeria (CBN) yesterday gave approval-in-principle to Accion, a United States-based microfinance company and seven others, including indigenous firms, to operate as Micro-Finance Banks (MFBs) in the country.

From Kunle Aderinokun in Abuja - The other seven companies are Susu MFB, Lagos; Integrated MFB, Lagos; MIC MFB, Lagos; Osun State College of Technology (OSCT), Esa Oke, Osun; Wize Trade MFB, Lagos; Mustasons MFB, Lagos and; First Global MFB, Port Harcourt, Rivers state.

To secure the apex bank’s final approval, the newly licensed MFBs, shall be required to comply with conditions precedent to the commencement of operations, as contained in the regulatory and supervisory framework for microfinance banks in Nigeria, released in December 2005 and launched in January 2006 by President Olusegun Obasanjo.

Under the regulatory and supervisory framework for microfinance banks, the CBN stated that there shall be two categories of licences available for promoters (both local and foreign) of Micro Finance Banks based on geographical coverage.

The first category would be Micro Finance Bank licensed to operate as a unit bank (also known as community banks) and which shall operate and open branches within a specified local government area (LGA).

CBN said the minimum capital requirement shall be N20 million or such amount as may be prescribed by it from time to time.

The second category would be Micro Finance Bank licensed to operate in a State and open branches within a specified state or Federal capital territory and the minimum capital requirement of N1billion only is required or such an amount as maybe prescribed by the CBN from time to time.

According to the CBN, over 700 existing Community Banks across the country, non-governmental organisations and other microfinance institutions, according to the CBN, have till December 2007 to convert by meeting approved guidelines or

should voluntarily exit.

By exiting voluntarily, the apex bank added that the community banks, MFIs are expected to wind up and pay their depositors their necessary dues.

Declaring open a three-day Workshop on Micro-Finance yesterday in Abuja, Director, Other Financial Institutions Department (OFID) of the CBN, Mr. Sam Oni told the newly approved MFBs and other would-be operators that the banking watchdog would not condone unethical practices such as insider abuses and other professional misconduct, vowing to apply appropriate sanctions to errant operators. He drew the attention of the directors and operators of the emergent MFBs to the importance of good corporate governance.

According to him, “the operations of the MFBs will be anchored on best practices in corporate governance. In this respect, it is no longer going to be business as usual as the CBN will, at all times, monitor the activities of the directors and top management staff in their oversight functions.”

He however expressed belief that, “all operators in this new dispensation will play according to the rules and strive towards self-regulation which is the desired goal in banking supervision.”

He noted that “where this is the case, resort to sanctions and punishments shall be rarely applied.”

Oni pointed out that the workshop, organised for community banks that have met the minimum paid up capital requirement of N20 million for conversion into micro-finance banks and non-governmental organisations/micro-finance institutions with a sizable asset base that could enable them transform into MFBs, have been put together to elicit their interest in the operations of microfinance banks.

To this end, he added that, the apex bank selected topics to acquaint the participants with microfinance operations namely, microfinance: principle and practice; microfinance policy regulatory and guidelines for microfinance banks; overview of business plan using microfinance and other planning software; corporate finance; rating of microfinance banks; conversion/transformation of community banks and non-governmental organisations/microfinance institutions to microfinance banks; risk management in MFBs and the returns format for MFBs.

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