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Requirements For Starting And Running A Microfinance Bank In Nigeria



Starting any business is not difficult if you have the required skills and orientation and how to go about it. So, if your interest is starting a microfinance bank in Nigeria, then, you are in the right place as I am just about to discuss with you the steps on how to achieve that. You will get to find out Requirements For Starting And Running A Microfinance Bank In Nigeria. Here, I will be discussing with you the requirements as well as the paperwork which is needed in setting up a microfinance bank in Nigeria.

Microfinance Bank In Nigeria: Meaning and Functions

By Microfinance bank, I am referring to a company which is licensed by the Central Bank of Nigeria (CBN) to offer both financial and non-financial services to the Nigerian population. Microfinance banks (MFB) are into the provision of loans and other forms of securities such as fund deposits and domestic money transfers. They are targeted at citizens such as the youths, the employed and the unemployed, farmers and artisans, fishermen, non-skilled as well as non-salaried workers in the informal sectors and formal sectors of the Nigerian economy.

The volume of loans provided by microfinance banks is dependent on the cash-flow density of the business as well as the loan recipient’s character. As such, most of the loans provided by microfinance banks in Nigeria are termed, “unsecure”.

Nature Of Loans Offered By MFBs

Loans offered by microfinance banks have a short-term repayment plan. Some can last 6 months, while others can last up to 12 months. The maximum loan repayment timeframe in Nigeria is 24 months. In most scenarios, loans given by microfinance banks do not exceed N500, 000 or an equivalent of one percent (1%) of the shareholders’ liquidity.

Types Of Microfinance banks In Nigeria

Microfinance banks in Nigeria are three types and you may choose to operate any of the following: Unit microfinance bank, State microfinance bank and National microfinance bank.

Unit microfinance bank requires at least 20 million naira in capital to start and operate and are not allowed to operate branches or cash centers except the main bank office.

State microfinance banks, on the other hand, require a startup capital base and under approval by the central bank of Nigeria hands the states his residence in the federal capital territory as its target base heat and how it operates branches or cash sentence under approval by the central bank of Nigeria.

Finally, National microfinance banks require a capital base of two billion naira (N2b) and such microfinance banks can cover all the states in the federation as well as the federal capital territory under approval by the Central Bank of Nigeria. Each new cash center or branch can be set up in all over the country.

Requirements For Microfinance Bank Licensing In Nigeria:

(A) A written application to the Governor of the Central bank of Nigeria (CBN) indicating which of the 3 categories of microfinance bank listed above you or your company is interested in is required. This application should be accompanied by:

  1. An Application fee of N50,000 for unit microfinance bank, N100,000 for state microfinance bank, N250,000 for national microfinance bank in bank draft or e-payment in favor of the CBN.
  2. A deposit of the already mentioned capital requirement of the MFB in an MFB share capital escrow account with the CBN. This will be released with interest to the promoters after license issuance.
  • Evidence that the capital requirement which was paid is acceptable to the CBN and does not come from illegal sources such as laundered money, or money from illicit trades, etc.
  1. Detailed microfinance bank feasibility report
  2. Certificate of capital importation in case of foreign capital.
  3. A copy of your company’s memorandum of association as well as the articles of association.

(B) A Letter of intent to pay for the subscribed shares of the proposed MFB by its subscribers.

(C) A list of your promoters/proposed shareholders, together with their address and the names & address of their bankers.

(D) Particulars of the proposed board of directors.

Granting of The Approval in Principle (AiP)

The CBN will properly vet the steps mentioned above and proceed to issue an approval in principle (AiP). The CBN will, however, interview the microfinance bank promoters and after this stage is passed, the AiP shall be granted by the CBN if it is satisfied with the overall quality within 3 months of receipt of the application.

Having the AiP is however not an automatic permission to immediately commence operation of a microfinance bank in Nigeria, pending the grant of a final license. The final operating license shall be granted a microfinance bank which has been granted the AiP after the following conditions have been satisfied by the MFB in Nigeria. The MFB may, therefore, commence full operation after satisfying the following:

Required Documents To Be Submitted By The MFB promoters To the CBN:

  1. A copy of the shareholders’ register
  2. A copy of the share certificate of each shareholder
  3. Form CAC 2 (return of allotment) filed with the corporate affairs commission (CAC).
  4. Form CAC 7 (particulars of directors)
  5. Memorandum of association as well as articles of association filed with the corporate affairs commission.
  6. Opening statement of affairs audited by an approved firm of accountants practicing in Nigeria.
  7. Certified true copies and the original copy of the certificate of incorporation.
  8. A copy of the letter of offer and acceptance of employment by top management staff as well as confirmation that the management team as approved by the CBN is in place.
  9. A letter of undertaking to comply all rules and regulations guiding the microfinance banks
  10. Form CAC 3 showing the location and address of the head office and branches where applicable.

Inspection and Commencement of Full Business Operation

After due completion of the above processes, the CBN will write to the MFB to commence full business operation after physical inspection of the MFB’s structures. The MFB will also need to inform the CBN of its date of full commencement of business.

Other Fees

There are some other fees aside from the ones statutorily required and stated above. So, if you wish to set up an MFB in Nigeria, you should take cognizance of the following “other fees”:

  1. Application fee for unit MFB N50,000;
  2. Application fee for state MFB: N100,000;
  3. Application fee for National MFB N250,000.
  4. Licensing fee for unit MFB N100,000;
  5. Licensing fee for state MFB: N250,000;
  6. Licensing fee for National MFB: N1million.
  7. Change of name for unit MFB: N20,000;
  8. Change of name for State MFB: N50,000;
  9. Change of name for National MFB: N100,000.

But what happens if the CBN is not satisfied with the structures and securities and other requirement parameters of the would-be microfinance bank? It will refuse to issue a license to such MFB and upon doing so, will simply return to the share capital as well as the interest element to the MFB promoters.

Caution for Licensed Microfinance Banks In Nigeria

It is against the ethics and operating principles of MFB in Nigeria to engage in the activities listed below upon granting of the final operating license by the CBN and once it commences business operations:

  1. Accepting of public sector deposits except for some permissible activities.
  2. Collection of third party cheques as well as other instruments for the purpose of clearing.
  3. Dealing in land business for speculative reasons and agendas.
  4. Dealing in real estate
  5. Engagement in international corporate financing
  6. Engagements in an international electronic funds transfer.
  7. Financing of illegal activities like smuggling, gambling, firearms etc.
  8. Involvement in Clearing house activities
  9. involvement in financial transactions which involves international commercial papers
  10. Involvement in foreign exchange transactions.
  11. sales/purchases as well as leasing or renting of any kind with the officers and/or directors, employees or persons without the written approval and permission of the CBN

Any MFB involved in any of the kinds of transaction listed above or as stipulated in the supervising guidelines regulating microfinance banks in Nigeria will have its license revoked. It is also regulated by provisions in the banking and other financial institutions act (BOFIA) as amended,1990.

Once all the guidelines mentioned above have been duly adhered to and comprehensively followed by anyone intending to establish a microfinance bank in Nigeria, with due consideration of the cautions stated and as reflected in the banking and other financial institutions act (BOFIA) as amended,1990 and the CBN is absolutely satisfied, the microfinance bank will be set up and ready to commence full business operations.

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Ekemini Ekpo is a professional writer, blogger, and internet marketer. He is passionate about engineering, business, investment, entrepreneurship, finance, and personal development. When he is not managing web projects, he handles academic research writing and data analysis for individuals and organizations.

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Banks & Banking

Fixed Deposit Vs. Treasury Bill In Nigeria: What Is The Difference?



Many Nigerians find it hard to differentiate between fixed deposit and treasury bill in Nigeria If you are one of them, then worry no more because in this post I discuss the main difference between fixed deposit and treasury bills in Nigeria.

First, What is a Fixed Deposit (FD)?

A fixed deposit usually abbreviated “FD” is a type of investment account that pays a fixed rate of interest to investors over and until a given date. While the fixed deposit runs, the investor would not be allowed to withdraw his or her funds.

Because of the higher rate of interest when compared with savings account, many people tend to put their monies in fixed deposits. Besides this, fixed deposits provide other advantages like tax benefits, safe investment, flexibility, and liquidity. All these intrigue many investors to prefer using a fixed deposit to an ordinary or augmented savings accounts.

But as we all know, whatever have advantages must have disadvantages and fixed deposit account is no exception. The most known risks that fixed deposit faces are inflation risk, default risk, reinvestment risk, liquidity risk, and interest risk.

Fixed Deposit Vs. Treasury Bill In Nigeria: What Is The Difference?, fixed deposit and treasury bill

Fixed Deposit Vs. Treasury Bill In Nigeria: What Is The Difference?

What is a Treasury Bill?

Treasury bills in Nigeria are debt instruments issued by The Central Bank of Nigeria (CBN) and are guaranteed by the government. The central bank of Nigeria (CBN) uses treasury bills as a way to control the money supply in the country’s economy.

These bills are sold bi-weekly by auctions conducted by the Central Bank of Nigeria, and you can buy these bills from any official dealer or through banks’ Treasury bill applications. The Treasury bill is a safe form of investment that is fully backed by the Federal government of Nigeria.

Treasury bills have a lot of investment advantages and upper-hand. Few among them are:

  1. Treasury bills serve as good investment outlets,
  2. are non-taxable,
  3. they can be used as collateral, and
  4. can be converted to cash quickly.

Don’t get too engrossed, we’re talking about the difference between fixed deposit and treasury bill.

The Remarkable Differences Between Fixed Deposit And Treasury Bill In Nigeria

Below are some of the key differences.

  1. Fixed deposits are fixed for an allotted period and are sold daily by banks to their customers while treasury bills are sold bi-weekly.
  2. Fixed deposits are primarily sold and managed by small banks while treasury bills are managed only by the Central Bank of Nigeria although you can buy them through commercial banks in the country.
  3. In a fixed deposit, depositors invest their money with a bank and will be given interest at a given time. In Treasury Bills, an investor borrows money to the Central Bank of Nigeria (CBN) for an allotted period in exchange for interest.
  4. While fixed deposits are done for one month, six months, or a year, treasury bills are usually for a period of 91 days, 182 days, or a year.
  5. Fixed deposits are fully taxable while treasury bills are non-taxable; you only pay a bank fee for the rendered service.
  6. The interest gained in treasury bills is far higher than the one offered by banks in fixed deposits.
  7. Treasury bills allow more liquidity than fixed deposits because they are done for the short, semi-long and long term.
  8. Treasury bills are regarded as the safest and risk-free investments because the government can never run out of funds while fixed deposits are only secured as long as the bank is functioning.
  9. The Central Bank of Nigeria (CBN) always puts a limit to the number of treasury bills it will sell while there is no limit to the fixed deposits that are sold by banks.
  10. Treasury bills money are used by the Central Bank of Nigeria to control the supply of income in the economy while fixed deposits are used by banks for investments.
  11. Fixed deposits can be rolled over by banks as it is a way of saving and investing at the same time while treasury bills cannot be rolled over.
  12. The flexibility in fixed deposits is far more than the one in treasury bills. Because in fixed deposits, you can easily get your cash anytime you want it and you will get the interest you earned for that time, while in treasury bills if you have wanted to withdraw your money before the allotted time, you have to sell the rights of the treasury bills to another person or a bank.
  13. Treasury bills are accepted by all banks in Nigeria as collateral because they are considered risk-free while some banks do not accept fixed deposits as collateral because they do not consider the other banks as strong ones.


Both fixed deposit and treasury bill are good forms of investing. While fixed deposits allow you to withdraw your money at any time, treasure bills do not allow that, but they are considered safer because the government cannot go out of funds. While there is a high possibility of a bank going out of funds thereby dissolving your money in fixed deposits that is not the case with Treasury bills! So, if you are cautious of risks, then you should opt for treasury bills over fixed deposits.



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Banks & Banking

How to Start a Bank



In a vast and fast-growing county like Nigeria, we are faced with an ever-increasing population which has variegated financial needs. This creates the need for the establishment of more banks to meet these needs and/or which can solve the issues inherent in present-day banking activities. For some people, the issues relate to certain banking polices while for others it is trust issues. These drive their patronage to other banks. As a smart business investor, you should key into this situation, see it as an opportunity and start a bank in Nigeria as soon as possible.

The establishment of banks nationwide is something that cannot run out of significance because of the population of businesses and financial transactions. According to statistics, 43% of citizens living in Nigeria either operate an account or intend to do so. Different banks cater to different interests. Some of these interests may be on an individualist level or a corporate level.

Before I give you full details on how to start a bank, let me tell you the different categories of banks available today.

Categories Of Banks In Nigeria

Amidst the numerous banks scattered across the country, we can classify them into three distinct categories. These categories have all been permitted to carry out operations in Nigeria by the BOFIA (Banks and Other Financial Institution).

They include:

  1. Merchant banks,
  2. Commercial Banks, and,
  3. Specialized Banks, some of which includes non-interest Banks, mortgage banks Microfinance Banks and Development Banks.

All the categories mentioned are licensed to operate under the guidelines of the Central Bank of Nigeria (CBN). They may be owned privately or by the government.

Steps to Start a Bank

Steps to Start a Bank in Nigeria

Gain Sufficient Knowledge Of The Financial Service Sector

Unlike other sectors, the financial sector is quite a complex aspect to deal with. You need to gain relevant knowledge of money and what it takes to run a system as complex as that. By doing so, you arrive at a higher level of financial knowledge to help you satisfy your customers and meet their demands.

There are a lot of rules guiding the operation of the banking sector. You need to arm yourself with these relevant information before you set out to start a bank. What am I saying here? I am saying that you need to be well-vested in the running of a bank. This you can get by studying Banking and Finance at a Tertiary Institution in Nigeria or Overseas, especially a University.

Obtain the Appropriate Banking Experience

To be able to operate and handle a bank, you need as much experience as you can get. It is not as simple as you can have in coffee shops, supermarkets, or even schools. You need a wide range of encounters in and out of the system to build your survival rate in this sector.

You need to make comparisons with other banks and understand how they are being run. As you would notice, there are some sensitive details you won’t get until you get hands-on experience or have someone share with you what exactly operating a bank entails.

This is why you won’t find bank owners who haven’t served in the system. As they grew in ranks and experience, they were able to set up theirs.

To help you build a solid and adequate knowledge-base, you need to have passed through series of educational trainings and certifications. This alone doesn’t guarantee that you are well-equipped to handle the pressure from the provision financial and non-financial services in a bank. You would also need managerial and business skills to plow your way to success.

Decide On The Type Of Bank You Want To Operate

Earlier, I established that there are different types of banks that are established in the country. You need to know which one of them that you would love to open. The different bank types have their unique requirements and demands. The level of preparation and procedures for establishment and operation of each of them is also not the same. You need to know what category you are ready to embark on.

Conduct Thorough Feasibility Study Based On Your Category

Having the desire to establish something doesn’t automatically mean it would turn out fine. The major reason why a lot of businesses fail is that there are no accompanying researches and studies done to know the areas of strength. Every business comes as a solution to a pitfall or limitation of another.

To make your bank successful in customer satisfaction, you need to understand what financial service(s) customers complain of in other banks and how you can solve this challenge in your bank. This means most of your findings would revolve around the customers.

Raise The Necessary Capital and Partners

Since you’ll be in charge of people’s funds and resources, you need to be able to convince accreditation bodies that irrespective of whether there are flops in the amount of capital generated, you can still disburse what the customers have entrusted into your hands.

Your customers are looking forward to having their money multiply in their accounts. It is now up to you to determine how this money will be used to generate more funds either through loans, investment and so on. This is why you are required to provide a huge amount of startup fines amounting to thousands and millions of dollars.

After successfully meeting up the target to begin with, you need to start scouting out for partners. Their duty is to invest in your bank and receive a percentage as return or profit. The partners who invest with you must have a well-defined financial means to avoid incrimination.

Obtain Your License From

Now, proceed to the Central Bank of Nigeria (CBN) for accreditation and issuing of licenses. While this process takes a stipulated time, you must ensure that you provide maximum security for the money entrusted into your hands by your customers. This will be well vetted by the licensing department of the CBN and any other regulating institution.

Get A Suitable Location For the Business

Properly siting a business is sine qua none to business success. Hence, from the early stages you must give proper consideration to where to intend to establish your bank. You might have a couple of addresses in mind to choose from. However, you must select a place that matches your business needs.

Whether the land is purchased or leased, you cannot afford to make mistakes with your choice of location. The location of your bank should be at a place that is easily accessible and safe. Customers will not patronize you if the bank is in a hidden area.

Engage in Aggressive Marketing and Advertisement

Banks experience so much competition from other banks who desire to have as many customers as possible. It is now left for you to draft out a means to reach out and inform others of the service you offer and how your services would benefit them the more compared to other banks.

This can be easily achieved through professional marketing and advertising campaigns. Your presentation of your bank services to the public will determine if they see you as one who thy can do business with or not.

Maximize tools like the Social media, Television, Radio, Newspapers and Publishing Houses to spread your information. You can also spread word on the streets and marketing centers through special campaigns that bring you closer to those who would need financial services.

Thank you for taking the time to go through this article on how to start a bank. I hope that you learn from this and use the information contained herein to your maximum advantage. Have a pleasant day!



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Banks & Banking

How To Get Business Loan in Nigeria



Today, I want to talk to you about something that is very important to business growth in Nigeria: how to get a business loan in Nigeria. A lot of businesses need a loan to improve their businesses because finance is a cardinal fuel for business progress. Loans may be gotten with or without interest, depending on who is giving the loan. Also, loans could come with or without collateral.

Collateral is something like a car, a house, a piece of land that you own, and/or any other tangible asset which is yours or which you have claims/rights to. Today in Nigeria there are many platforms, especially mobile apps, through which you can access loans without any collateral.

However, there are limitations to the use of such platforms the most typical of which is the limitation on the volume of loan sum which a business can get. For you to get a meaningful loan sum, you would have to contact a financial house like a bank, private loan givers, and non-bank corporate entities which provide high-volume loan facilities.

Business Loan in Nigeria

A business owner applying for Business loan in Nigeria

Typically, the 3 ways to get a business loan in Nigeria are:

  1. Getting a loan from relatives, friends or family
  2. Getting a loan from microfinance banks in Nigeria and
  3. Getting a loan from commercial banks in Nigeria

Often, options 2 and 3 above are usually most people’s favorite. Based on the information at my disposal, I will throw some light on the third option and give you some insight into the criteria for getting a loan from 4 commercial banks in Nigeria today.

The beautiful thing about this is that these commercial banks actually give business loans to small businesses collateral-free (at least as of the time of writing this). Things might change in the future. So, do well to re-check the criteria before you apply for and obtain a loan from any of the commercial banks in Nigeria that I discuss below.

Also, it is advisable to visit the banks and check if you meet the criteria that they set for getting a loan to finance your business. For now, some banks which give business loans in Nigeria are Wema Bank, Heritage Bank, First Bank of Nigeria Plc., and Stanbic IBTC Bank.

Let us review how each of these banks and the business loans that they give:

Wema Bank

Wema bank through its collateral-free loan has created an atmosphere for business owners to think big, start small, and eventually become successful. The loan which Wema bank gives to businesses ranges from N100,000 to N1 million without any collateral.

However, to qualify for this offer, the borrower needs to operate a business account with Wema bank and have a record of a steady transaction of about six months in his/her corporate business account with the bank. This means that will give you a business loan ranging from 100,000 to 1 million if you have operated a business account with them for six months.

Kindly walk into any branch of Wema bank to get more information on this.

Heritage Bank

Heritage Bank seeks to harness the skill and entrepreneurial spirits among Nigerian youths by providing timely and cheap loans to assist entrepreneurs to implement their business ideas. The bank also has a special package for NYSC members.

Heritage Bank’s loan facility is aimed at helping people in Nigerian marketplaces and whoever needs access to business finance through short-term borrowing from the bank. Kindly visit them to get more information on this.

They have a loan facility for people who want to start up small businesses and need between fifty thousand and 400 thousand upwards. There are loan packages for operators of large scale businesses.

Please, visit the bank to get more information on this. Some of their loans are collateral free with a few stipulated conditions attached.

Business Loan in Nigeria

First Bank of Nigeria (FBN)

First Bank of Nigeria (FBN) offers bank loans that are easily accessible to entrepreneurs irrespective of the type of business insofar as it is not illegal business. To be qualified for this loan the only thing required of you is to undergo a psychometric test and pass it.

Thereafter, you will provide the bank with your business plan and financial projections. They need your business plan to see how viable your business is and your capacity to repay the loaned sum. If you can convince and assure them of your capacity to repay your loan, you will be given the loan to fund your business.

Standbic IBTC Bank

The majority of Standbic IBTC Bank loans are designed to assist Small and Medium Entreprises (SMEs) acquire business assets and other facilities. The criteria for getting a loan from Standbic IBTC Bank are not enormous. Also, the loans given by the bank to SMEs are collateral free. If you are a big business you might need to present collateral.

To get a loan for a small business from Standbic IBTC Bank, you have to provide the full names and capacities of those who constitute the management team of the business. Also, you must state the reason why you need the business loan.

You would also provide:

  1. your business financial statement including an income statement,
  2. balance sheet,
  3. cash flow statements,
  4. personal statements of assets and liabilities of all partners in that business
  5. members and directors 12-month cash flow forecasts or financial projection,
  6. the amount of your own equity contribution.

The list above is really exhaustive, a bit complex but I suggest that you visit Standbic IBTC Bank to get more information about this. Again, this is for interest-free loans. So, kindly visit the bank to find out more about other loan packages.


Just like I said when I started this discussion, the best place to get business loans in Nigeria to a finance business today is the banks. This is because banks have the capacity to offer large loan sums. However, you can also get loans from your friends, relatives, associates and family members to finance your business. If you wish to use the bank, you need to visit the banking halls to get more information on how to get loans.

Also, remember that there are various loan packages available for you to choose from. So, you would have to choose the one that best suits your business needs. Different banks operate differently and have different loan packages for different classes of businesses. Some banks business loans come with interest, others don’t. Any of these can be assessed in the form of revolving credit, installation payment, order contract finance, etc.

This article explained some banks in Nigeria that offer business loans for startups and established businesses, collateral-free. You can contact these banks to get a loan to support your business.

It is advisable to visit these banks and get detailed information on how to access their loans instead of relying for unverified information on third-party blogs and websites. The five banks in reviewed in this article are Wema bank, Heritage bank, Stanbic IBTC Bank, and First Bank of Nigeria Plc (FBN). So, if you need a business loan I would suggest that you visit the banks and get detailed information about how to access loans especially loans without collateral.

Have you heard of Sumobank? Do you know you can save and make good returns on your savings with Sumobank today? To learn how to get business loans and improve your savings, click here to visit Sumobank

Thank you and have a splendid day ahead.



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