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Microfinance banks in Nigeria play a crucial role in providing financial services to low-income and middle-class citizens who may otherwise be deemed “unbankable” by traditional commercial banks. In this blog post, we’ll delve into the definition, benefits, and the process of setting up a microfinance bank in Nigeria.
What is a Microfinance Bank in Nigeria?
Microfinance banks are financial institutions specifically designed to cater to the financial needs of low to middle-income individuals. They serve as a lifeline for those who might not have access to traditional banking services. The National Microfinance Bank is a prime example, dedicated to addressing the financial requirements of Nigerians.
While the specific functions offered by microfinance banks may vary, their primary goal remains consistent – to empower customers towards self-sufficiency. Common services include deposits, payment services, loans, insurance, and money transfers.
Benefits of Microfinance Banks in Nigeria:
- Income Generation: Microfinance banks offer opportunities that can lead to increased income, enabling individuals to provide for their families more effectively.
- Inclusion of the Unbankable: By catering to those typically excluded by commercial banks, microfinance banks ensure financial inclusion and bridge the gap for the underserved in society.
- Job Creation: Microfinance banks contribute to job creation, especially in local communities, fostering economic growth and stability.
- Economic Growth: The services provided by microfinance banks contribute to the overall economic growth of the country, addressing financial needs at a grassroots level.
- Accessible Loans: Microfinance banks offer loans with better repayment rates, supporting those in need while promoting responsible financial practices.
Setting Up a Microfinance Bank in Nigeria:
To establish a microfinance bank in Nigeria, you need to adhere to specific financial and structural requirements. The three categories available are Unity microfinance bank, State microfinance banks, and National microfinance banks, each with varying capital requirements.
The process involves:
- Categorization: Determine the category of microfinance bank you intend to establish based on capital requirements.
- Application to CBN: Write an application to the Governor of the Central Bank of Nigeria, accompanied by necessary documents, including a feasibility report, memorandum of association, and articles of association.
- Capital Requirements: Provide evidence of acquiring capital through lawful means and deposit the required capital to the microfinance bank share capital escrow account with the Central Bank of Nigeria.
- Approval: Await approval from the Central Bank of Nigeria.
List of CBN Approved Microfinance Banks:
There are nearly 1000 CBN approved microfinance banks in Nigeria. You can find the complete list on the official CBN website at www.cbn.gov.ng/supervision/Inst-MF.asp. Some popular microfinance banks include Hasal Microfinance Bank, Capstone Microfinance Bank, Lapo Microfinance Bank, AB Microfinance Bank, Richway Microfinance Bank, and Accion Microfinance Bank.
Conclusion:
Microfinance banks play a vital role in building Nigeria’s economy by extending financial services to the unbankable. Their services, tailored to the needs of the community, contribute to individual and communal growth. As the government actively encourages microfinance banks, their significance in fostering economic development cannot be overstated. Explore the possibilities with microfinance banks and take a step towards financial inclusivity and empowerment.