Although not exactly opposite, we can say microfinance banks to be the flip side of commercial banks. In the industry terms, they provide banking services to the “unbankable”. Microfinance banks are the answer to the cry and complaints of many paper works and protocols used by commercial banks. Their processes are much easier and straightforward, which is why medium to low-income earners prefer them.
What is a microfinance bank in Nigeria?
Microfinance banks or microcredit is a financial institution that provides banking to the low-income to middle-class citizens. Without microfinance banks, such individuals would not normally have access to the benefits of a bank. Asides the obvious help it renders, the goal of a microfinance bank is to offer an opportunity to its customer to become self-sufficient.
On the other hand, the total functions offered by a microfinance bank may vary from one institution to another. However, their primary goal remains the same. The general functions of microfinance banks include deposits, payment services, loans, insurance, and money transfers.
What are the benefits of microfinance banks in Nigeria?
Some of the benefits of using a microfinance bank in Nigeria are:
- Microfinance banks allow you to provide for your family through opportunities that may yield more income
- It serves the unbankable in the society
- Microfinance banks create jobs
- It helps the country’s economy grow
- The bank offers loan to the poor as well as a better repayment rate
How do I set up a microfinance bank in Nigeria?
There are certain financial and structural requirements that you must meet before getting approval from the CBN to start up a microfinance bank in Nigeria. These requirements vary depending on the focus region that your bank intends to cover.
The three categories available for microfinance banks in Nigeria are:
- Unity microfinance bank (only one main office, and a paid capital of N20,000,000)
- State microfinance banks (can have branches within a state and capital of N100,000,000)
- National microfinance banks (allowed to have branches all over Nigeria and must have a capital of N2,000,000,000).
After sorting out your category, you would need to write an application to the governor of the Central Bank of Nigeria. Along with this list, you are required to submit the following:
- Application fee of N50,000 for unit, N100,000 for state, and N250,000 for national
- A capital deposit to your microfinance bank share capital escrow account with the Central Bank of Nigeria
- Evidence that your capital was acquired through lawful means
- Detailed feasibility report
- A copy of the memorandum of association and articles of association
- Capital importation certificate if your capital was imported
- The details of your proposed board of directors
- Your list of proposed shareholders along with their addresses and the name of their banker’s addresses
- An intent letter which states that the bank’s subscribers are going to pay for their subscribed shares of your bank.
List of CBN approved microfinance banks in Nigeria
There are currently close to 1000 CBN approved microfinance banks in Nigeria. To browse through their full list, you can visit the CBN official website at www.cbn.gov.ng/supervision/Inst-MF.asp.
However, some popular microfinance banks in Nigeria are:
- Hasal Microfinance Bank
- Capstone Microfinance Bank
- Lapo Microfinance Bank
- AB Microfinance Bank
- Richway Microfinance Bank
(Could include the names of all the previous microfinance banks that we have written on)
Microfinance banks are a very important block for building the country’s economy. Their services and appeal to the unbankable, ensures that a majority of the citizens are covered, and afforded investment opportunities. In general, Microfinance banks help the country grow on a micro-scale which is why it is largely encouraged by the government today.