from Uche Usim, Abuja and Chinwendu Obienyi
the The Central Bank of Nigeria (CBN) over the weekend warned all microfinance banks (MFBs) to adhere to their approved operating parameters and warned those who accidentally get lost in wholesale banking not to do so immediately or with unpleasant consequences, including revoking theirs Licenses to count.
In an August 19 circular entitled “Ceasing Illegal Microfinance Banks”, Ibrahim Tukur of the Fiscal Policy and Regulation Department noted with concern that some MFBs are venturing into foreign exchange deals that are completely outside of their operational scope
The circular states: “CBN has observed the activities of some Microfinance Banks (MFBs) that have gone beyond the scope of their operating licenses by engaging in improper activities, particularly wholesale banking, foreign exchange and others.
“In view of the comparatively low capitalization of MFBs, trading in wholesale and / or foreign exchange transactions represents a considerable risk with devastating consequences for the stability of the financial system.
“It has therefore become imperative to remind all MFBs to strictly adhere to the existing revised Regulatory and Supervision Guidelines for Microfinance Banks in Nigeria 2012 (the Guidelines).
“In order to avoid misunderstandings and in accordance with the permissible activities of specialized micro-institutions, MFB’s foreign exchange transactions are strictly prohibited; MFBs should primarily focus on the provision of financial services for private and / or small customers; Microcredit and retail transactions conducted by MFBs are capped at N500,000 per transaction for Tier 2 MFBs and N1,000,000 for other categories, and microcredit facilities account for at least 80 percent of the total loan portfolio for MFBs ”.