Microfinance Bank License: Steps to Obtain CBN Approval

By Adolphus Abraham

It seems to me that the recapitalisation fever for microfinance banks is gradually reaching a crescendo following the April 2020 deadline to meet half of the new minimum capital and going by the nature of calls I received during the course of the week. The question that ranked most during the week was “So what should I do next now that I have the fund to use as capital”?

So this week, I will share with us the steps to take to obtain your MfB license. These steps are directly from my playbook.

When you have conceived the idea to float a MfB, you should follow the following steps. Some people would prefer to use a consultant to do it but their job would not be different from the steps I am going to show you below. The choice is yours.

i. Identify the Shareholders/Investors. These are the people whose funds you have decided to use in raising the minimum capital.

ii. Identify who the board of directors shall be. Obtain their curriculum vitae and means of identity. They should be knowledgeable and be of good standing. You would be needing a minimum of 5 directors plus a professional who will act as the Independent Director.

iii. Identify the Chief Promoter. This could be you as the visionary and the key contact person.

iv. Identify the subscription account or share proceed collection account. This is the bank account that all the subscribers shall pay their share subscription into. It could be your account.

v. Prepare a feasibility report

vi. Prepare a business plan

vii. Prepare operational manuals for all the units as provided by the MfB guidelines. The units/functions include Internal control/Audit, Operations, Treasury, Human Resources, Finance and Administration, Compliance, Risk management, Credit and Marketing etc. You may have to get a professional to help you craft these manuals/policies if you do not have the experience.

Once the above documents are ready, take the following steps.

1. Call for the payment of shares by the subscribers into the designated Shares Collection Account.

2. Transfer the balance in the share collection account to a designated account at the CBN and get a confirmation. Keep your confirmation slip.

3. Print the bank statement of the shares collection account and make sure it reflects all inflows from subscribers.

4. Get the subscribers to print their statement of account, acknowledged by their bankers and submit to the Chief Promoter.

5. Prepare your application letter to be signed by two proposed directors.

6. Submit your application and wait

After a few weeks, the CBN shall issue you an Approval-In-Principle (AIP). The AIP shall detail all further steps required to proceed to the final license stage. It is at this point you are required to incorporate the MfB with the CAC. It is important to mention that you should ensure that there is no deviation in terms of name of MfB, number and name of directors and shareholding structure from what was approved by the CBN and what you will submit to the CAC. Any deviation could lead to a rejection by the CBN and ultimately extend the approval period.

Next week we shall discuss some of the issues to be specifically addressed by the AIP. Till then, be safe.

See you next week.

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•  Adolphus Areban Abraham is the Managing Director/CEO of Rigo Microfinance Bank based in Lagos. He can be reached on jiyere@yahoo.com

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