The Central Bank of Nigeria (CBN) has pegged maximum loan limit for Microfinance Banks (MfBs) at N1 million per transaction.
The apex bank gave this directive in a circular to all MfBs titled: Cessation of non-permissible activities by MfBs”.
The MfB operators were also strictly prohibited from engaging in foreign exchange transactions.
The CBN further directed the MfBs to primarily focus on providing financial services to retail and/or micro clients, microcredit and retail transactions not exceeding N500,000 per transaction for tier 2 unit MFBs and N1 million for other categories.
Also, micro credit facilities shall constitute a minimum of 80 per cent of total loans portfolio for MFBs.
The apex bank also warned MfBs to desist from offering non-permissible activities, especially foreign exchange and wholesale banking transactions.
The regulator noted that it observed that some MFBs are engaging in non-permissible activities which pose risk to the financial system.
The circular, which was signed by the Director of Financial Policy and Regulation Department, Ibrahim Tukur, stated: “The Central Bank of Nigeria (CBN) has observed the activities of some MFBs that have gone beyond the remit of their operating licenses by engaging in non-permissible activities, especially wholesale banking, foreign exchange transactions and others.
“Given the comparatively low capitalization of MFBs, dealing in wholesale and/or foreign exchange transactions are a significant risk with dire consequences for financial system stability thus, therefore, become imperative to remind all MFBs to strictly comply with the extant Revised Regulatory and Supervisory Guidelines for MFBs in Nigeria 2012 (the guidelines).”