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    Home»Business Matters»CBN warns microfinance banks against forex transactions

    CBN warns microfinance banks against forex transactions

    Business Matters By Temitope N.Aug 21, 2021No Comments2 Mins Read
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    The Central Bank of Nigeria has warned microfinance banks against performing certain non-permissible activities, including wholesale backing and foreign exchange transactions.

    CBN Boss
    CBN Boss

    This was contained in a circular titled ‘Cessation of non-permissible activities by microfinance banks’ released on Friday by Ibrahim Tukur on behalf of CBN’s Financial Policy and Regulation Department.

    The circular read, “The Central Bank of Nigeria has observed the activities of some microfinance banks that have gone beyond the remit of their operating licence by engaging in non-permissible activities, especially wholesale backing, foreign exchange transactions and others.

    “Given the comparatively low capitalisation of MfBs, dealing in wholesale and/or foreign exchange transactions are a significant risk with dire consequences for financial system stability.”

    See also  Milk Can Be Produced Locally In Niger State - CBN

    The bank said it had, therefore, become imperative to remind all MfBs to strictly comply with the extant Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria 2012.

    It said, “For the avoidance of doubt and consistent with the permissible activities of specialised micro-institutions: MfBs are strictly prohibited from foreign exchange transactions.

    MfBs are to primarily focus on providing financial services to retail and/or micro-clients with a limitation of N500,000 per transaction for Tier 2 Unit MFBs and N1m for other categories.”

    According to the circular, microcredit facilities shall constitute a minimum of 80 per cent of total loans portfolio for MfBs.

    See also  CBN to refund licensing fees of new BDC promoters

    The apex bank warned that it would continue to monitor developments in the MfB sector and apply stringent regulatory sanctions for violations of extant regulations, including revoking licences.

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