MICROCAPITAL BRIEF: Central Bank of Nigeria (CBN) Releases Categorization System for “Non-interest Islamic Microfinance Banks”

The Central Bank of Nigeria (CBN), the country’s central banking authority, recently released a new categorization system for “Non-Interest Islamic Microfinance Banks” (NIMFBs). Such institutions operate under Islamic principles that prohibit charging interest, instead using arrangements such as the sharing of profit and loss.

CBN organized NIMFBs into three categories: “Unit,” “state” and “national.” This categorization and a series of other regulations came in response to requests from people seeking to establish NIMFBs and to encourage growth of this sector.

Unit NIMFBs must have a minimum of paid-up capital of NGN 20 million (USD 71,000) and may open one branch location as long as it is located within the same municipality as the organization’s headquarters. State NIMFBs may operate in one state (or in the Federal Capital Territory) if they maintain minimum paid-up capital of NGN 200 million (USD 350,000). Institutions in this category may open multiple branches in the state within which their headquarters are registered. A “national” NIMFB is permitted to operate in any state or territory of Nigeria so long as it holds NGN 2 billion (USD 7 million) in capital.

As of 2016, CBN had an opening balance of NGN 190 billion (USD 673 million), a standing deposit facility of NGN 36 billion (USD 130 million), and a standing lending facility of NGN 190 billion (USD 660 million).

By Petra Barbu, Research Associate

About Central Bank of Nigeria

The Central Bank of Nigeria (CBN) was established in 1958 as Nigeria’s central banking authority. As defined by the act of parliament that created CBN, its statutory mandates are as follows: “to issue legal tender currency; to maintain external reserves; to safeguard the international value of the legal tender currency; to promote monetary stability and a sound financial system in Nigeria; and to act as banker and financial adviser to the Federal Government.” As of 2016, CBN had an opening balance of NGN 190 billion (USD 673 million), a standing deposit facility of NGN 36 billion (USD 130 million), and a standing lending facility of NGN 190 billion (USD 660 million).

Sources and Additional Resources:

[1] Today: CBN unveils guidelines for non-interest microfinance banks

[2] Central Bank of Nigeria

[3] Microfinance Universe: Central Bank of Nigeria

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