Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria

Nigeria

(enacted in 2005)

The Regulatory and Supervisory Guidelines for Microfinance Banks (MFBs) in Nigeria, issued by the Central Bank of Nigeria (CBN) in December of 2005, provide regulations, including prudential requirements, for all supervised providers of microfinance services in Nigeria.

The guidelines regulate microfinance activities and the establishment and operations of microfinance banks (MFBs) that seek to take deposits from the public and engage in microfinance intermediation services for their clients. The purpose of the guidelines is to achieve balanced growth, promote transparency, control risks faced by entities engaged in microfinance and eliminate barriers and unnecessary requirements. The guidelines address the issue of microfinance based on particular features and risks associated with this activity.

The main provisions of the guidelines discuss:

  • Power to regulate microfinance;
  • Permissible and prohibited activities;
  • Ownership and licensing requirements;
  • Management;
  • Conditions precedent to commencement of operations;
  • Funding accounts and related matters;
  • Compliance with Anti-Money Laundering Act and the Know-Your-Customer circulars;
  • Publication of audited financial statements;
  • Prudential requirements;
  • Assessment of soundness;
  • Requirements for increase in share capital;
  • Disclosure of interests by directors and officers of MFBs;
  • Disclosure of required information to credit reference bureau;
  • Operational requirements and controls;
  • Appointment of Chief Executive and Principal Officer and External Auditor;
  • Restructuring and reorganization;
  • Transformation of other institutions into MFBs (including universal banks/commercial banks, community banks and NGO-MFIs);
  • Collaboration to regulate deposit/savings mobilization institutions;
  • Conditions for granting and revocation of license; and
  • Exit conditions.