Insurance and Business

Microfinance Banks ordered to stop forex transactions

The Central Bank of Nigeria (CBN) has ordered microfinance banks in the country to cease foreign exchange transactions and other unauthorised dealings.

This was contained in a circular by the apex bank titled ‘Cessation of Non-Permissible Activities by Microfinance Banks’.

Parts of the circular read, “CBN has observed the activities of some Microfinance Banks (MFBs) that have gone beyond the remit of their operating licenses by engaging in non-permissible activities especially wholesale banking, 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.

“It has, therefore, become imperative to remind all MFBs to strictly comply with the extant Revised Regulatory and Supervisory Guidelines for Microfinance Banks in Nigeria 2012 (the Guidelines).”

The primary business for microfinance banks is the provision of financial services to retail and micro-c;ients,

Microfinance banks that contravenes this directive, risk sanctions.