15 States Gets a Boost as CBN Gives 28 New Licences to Microfinance Banks

The financial sectors of 15 states in Nigeria received a boost in 2017 as the Central Bank of Nigeria (CBN) granted 28 new licences to microfinance banks (MfBs), a development that increased the number of microfinance banks in the country to 1,008, an increase of 3 percent over 980 MfBs in the country in 2016.

A further breakdown shows there are eight MfBs with national licenses, 107 with state licenses and 893 with unit licenses. An MfB with a national license requires N2 billion as paid up capital and can operate in all the states of the federation, subject to the CBN approval. An MfB with a state licence requires N100 million paid up capital and is allowed to have cash centres within the state while a unit MfB requires N20 paid up capital and cannot have cash centres besides the main office.

Lagos State, the nation’s commercial capital, got the highest number of new microfinance banks in 2017, as 12 out of the 28 newly licensed MfBs chose the state as their operation base. With that, the number of MfBs in Lagos rose to 197 in 2017 as against 185 in 2016, meaning that the state accounts for 20 percent of MfBs in the country.

“Lagos is the commercial capital of Nigeria and about 70 of the country’s GDP is domiciled there. Small businesses are the drivers of MfBs and they are predominantly in Lagos. The state also has the highest number of individuals who are financial literate. Since the small businesses that need micro loans are predominantly in Lagos, investors want to tap the opportunities not yet explored by the competition ”, Saheed Bashir, Senior Research Analyst at Meristem Securities, said.

Edo and Katsina states got two new MfBs each, and with that the number of MfBs in those states rose to 21 and 23 respectively in 2017 as against 19 and 21 in 2016. Twelve states got a new MfB each. They are Benue, Kwara, Nasarawa, Adamawa, Anambra, Enugu and Imo. Others are Akwa Ibom, Rivers, Ekiti, Ogun and Oyo states.

Based on geopolitical zone, the North East with just 42 MfBs has the least number of MfBs in the country. The South-South region with 112 MfBs has the second lowest units of microfinance banks in the country. The North West has 133 MfBs; South East, 177 MfBs; North Central, 182 MfBs and South West, 362 MfBs.

Apart from Lagos, other commercial centres in the country have significant number of MfBs and they include Anambra, 81; Abuja, 60; Oyo, 56; Ogun, 51; Kano, 47; Imo,43; Delta, 36; Niger, 34 and Osun state, 32 microfinance banks.

Surprisingly, Abia State, one of the leading commercial centres in the country, which is prominent in the Made-in-Aba products, only has just 19 microfinance banks (as at December 2017) and this is at variance with other commercial centres in the country.

“Many factors could be responsible for that. It could be that there are many branches of deposit money banks in the state which attend to the financial needs of the people. Also, the state may have a well-developed Esusu system. In all, we still need to do further findings as to why a state like Abia has just few microfinance banks”, Omotayo Muritala, research manager at the Lagos Business School, said.

“Investors always go to where there are opportunities. The presence of few microfinance banks in Abia could mean that the opportunities are not there for MfBs”, Bashir added.