Originally, microfinance banks were established to promote financial inclusion by providing accessible credit, savings and other financial services to low-income individuals and micro-entrepreneurs who were underserved by the commercial bank system[JA1] . Hence, the objective of the initiative was to stimulate economic activity, reduce poverty, and empower underserved communities.
However, in recent years, the rise of financial technology (fintech) platforms has significantly expanded the reach and delivery of banking services. Under prevailing regulatory frameworks, any fintech platform that accepts deposits from the public and facilitates withdrawals is engaging in core banking activities and therefore, must obtain an operational license from the Central Bank of Nigeria, the primary regulator of the industry.
Consequently, many fintech and credit-focused startups in Nigeria have opted to partner with, acquire, or operate under existing microfinance bank licenses as a means of legitimising their operations. This approach allows them to comply with regulatory requirements, leverage the payment and settlement infrastructure of the formal banking sector in addition to their personalised product offerings without undergoing the more capital-intensive process of obtaining a commercial banking or mobile money operating license.
Against this background, this article reviews the key licensing requirements and regulatory framework under the CBN’s Guidelines for Microfinance Banks in Nigeria (The Guidelines) as follows:
