Guidelines for the Regulation and Supervision of Microfinance Banks in Nigeria



In its continued bid to support the development and sustainability of Microfinance Banks (MFBs), the Central Bank of Nigeria (CBN) has issued an exposure draft of the Guidelines for the Regulation and Supervision of Microfinance Banks in Nigeria, 2020 (“the draft guidelines”). When implemented in April 2020, the draft guidelines will amend the Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria issued in 2012


The proposed changes are as follows:

  1. Categories of MFBs: The draft guidelines restructure the categories of MFBs by introducing two tiers of Unit MFBs: Tier 1 and Tier 2. Tier 1 Unit MFBs shall operate in the banked and high-density area, while Tier 2 Unit MFBs shall operate only in the rural, unbanked or underbanked areas.
  2. Bank Branches: By the former guidelines, Unit MFBs were authorised to operate in only one location and were prohibited from opening branches. The draft guidelines amend this by permitting a Tier 1 Unit MFB to open not more than 4 (four) branches outside the head office within 5 (five) contiguous Local Government Areas. A Tier 2 Unit MFB is also permitted to open one branch office outside the head office within the same Local Government Area.
  3. Minimum Share Capital: The table below reflects the old minimum share capital and the revised minimum share capital of MFBs.
  Old N Revised N
Tier 1 Unit MFBs 20,000,000 200,000,000
Tier 2 Unit MFBs 50,000,000
State MFBs 100,000,000 1,000,000,000
National MFBs 2,000,000,000 5,000,000,000
  1. Licensing Requirement: The draft guidelines create a pre-licensing presentation, as one of the application stages for the grant of an MFB licence. The presentation comes before the submission of a formal application for the grant of a licence. The promoters and investors are required to make a presentation on the business case of the proposed MFB to the CBN.


  1. Expanded Sources of Funds: All MFBs may source for funds from additional sources, including interventions funds from the CBN and foreign borrowing with approval of the CBN.


  1. Government Participation in MFB: The draft guideline introduces three models of government participation in MFBs:


  1. Fully Owned Government Microfinance Bank Model: This may be fully owned by a State or Local Government, which shall progressively divest its interest to private investors within a maximum period of five (5) years. It may be established as either a State or Unit MFB.
  2. Public-Private Partnership Model: Unlike the fully owned government MFB model, the State or Local government will collaborate with private entities to set up this model but shall progressively divest their interest within a maximum period of five years. The government shall have a maximum shareholding ratio of sixty percent (60%).
  3. Government Sponsored Co-operative Model: In this model, a State government will support a co-operative society already operating in the state to set up a Unit MFB. The government and co-operative society will have a share-holding ratio of 75:25 and members of the society will through savings and accumulated profit progressively repay the Government’s investment in the MFB within a maximum period of five (5) years.


  1. Compliance with Policies: All MFBs are required to comply with the provision of the Risk-based Cybersecurity policies, the Guidelines for Whistle-blowing in the Nigerian Banking Industry, and the CBN Code of Corporate Governance, as may be issued by the CBN from time to time.


The draft guidelines permit MFBs to establish branches within restricted regions. This will help to deepen financial inclusion. However, the increased minimum share capital will pose a challenge to banks and FinTech companies holding an MFB licence or wishing to obtain an MFB licence.

New FinTech entrants that require the Unit MFB license can apply for the Tier 2 Unit MFB license and operate out of “rural, unbanked or underbanked areas”, since the delivery of most products/services is not limited by the location of the provider.

A pdf of the draft guidelines may be accessed here.


For further information on this article and area of law, please contact Bukola Iji or Olayanju Phillips at: S. P.A. Ajibade & Co., Lagos by telephone (+234 1 472 9890), fax (+234 1 4605092) mobile (+234.809.990.0344) or email or

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