FOLLOWING the proposed increment in the capital base of Microfinance Banks (MFBs) by the Central Bank of Nigeria (CBN), likely mergers and acquisition may soon take place in the industry.
BusinessWorld can reveal that the apex bank is planning to increase the minimum capital base of microfinance institutions from N20 million to N100 million. The increment could consequently compel mergers and acquisition amongst microfinance operators, hence suppressing the number of MFBs from 898 to a considerable size.
This would translate to the big MFBs consuming the smaller ones that may be unable to raise their capital base, just as witnessed in the banking consolidation.                                                                           
Presently, the microfinance policy stipulates that a unit MFB should capitalise to the tune of N20 million before it can operate in the MF market.
But facts emerged recently that the prescribed capital base is not enough for a microfinance outfit to operate effectively, considering that most of them incur much cost in the form of fixed assets and paying salaries and so on.
Investigations show that the move was to make MFIs in the country strong and viable to withstand the challenges of the operating environment as well as survive competition.
According to a CBN source, “In 2005, N20 million was a lot of money, but today, barely can it set up the building of a microfinance bank. To operate successfully, a minimum of N100 million capital base is needed.”
Hence, the source believe that there is the need to review the capital base of MFBs as N100 million can make a MF outfit operate effectively and capture the market.
As microfinance institutions continue to face liquidity challenges, the CBN believes this is the only solution to boost liquidity in microfinance institutions. The apex bank official however advised microfinance institutions especially in Lagos to operate above N100 million as competition in Lagos state is getting stiffer. But for other institutions outside the state, N100 million could make them survive, he said.
BusinessWorld can reveal that the apex bank is still deliberating with the operators to sensitise them on the need to increase their capital base as the CBN recently summoned managing directors and chairmen of microfinance institutions in Lagos State to a meeting where the apex bank deliberated on the need to increase the capital base.
Our source disclosed that the CBN is taking the sensitisation campaign to other states of the federation, a move that will make the regulatory body increase the capital base in time to come.
It was learnt that the proposed increment was to allow MFBs impact on the lives of more people in order to reduce the poverty level in the country, as stated in the policy.  And with the review of the microfinance policy underway, there are indications that the new capital base would be included in the reviewed policy.