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Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria

Central-Bank-of-Nigeria

The Central Bank of Nigeria (CBN) has unveiled new guidelines for Microfinance Banks operating in Nigeria. The revised or second edition of its Regulatory and Supervisory Guidelines for Microfinance Banks is coming now, when business are getting back from the holiday break, and as the apex bank directs more attention to microeconomic conditions in Nigeria. In a CBN statement on the guidelines, it submits that, “The implementation of the Microfinance policy over the past six years and the experience gained, underscore the need for the review of the existing regulatory and supervisory guidelines.”

“This second edition addresses current realities and developments in the sub-sector. This document is, therefore, aimed at promoting innovative, rapid and balanced growth of the industry, leveraging on global best practice in Microfinance banking. Collaboration between CBN, Nigeria Deposit Insurance Corporation, Securities and Exchange Commission, National Insurance Commission Corporate Affairs Commission, National Association of Microfinance Banks, Associations of Non-Bank Microfinance Institutions in Nigeria and other relevant agencies shall be promoted to reduce arbitrage in the practice of micro-finance in the country.”

It also submits that, “In general, the guidelines that adequately address the features and risks of microfinance would effectively support the orderly development and sustainability of the institutions to enable them to achieve microfinance objectives of financial inclusion and poverty alleviation.”

“These guidelines recognise the distinctiveness of micro clients, ownership structure of the institutions, their credit methodology, and the central position of savings/deposits in the intermediation process. It also adopts measures to ensure the soundness and safety of the institutions, and the protection of depositors, especially low-income clients. Also, it defines institution types, loan documentation, portfolio classification, loan loss provision and write-offs, amongst others, and provides the basis for the establishment, operations, regulation and supervision of microfinance banks, and institutions.”

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