Frequently Asked Questions
What is a Microfinance Bank (MFB)?
A Microfinance bank is any company licensed by the Central Bank of Nigeria (CBN) to carry on business of providing microfinance services such as savings, loans, domestic funds transfer, and other financial services that are needed by the economically active poor, micro, small and medium enterprises to conduct or expand their businesses as defined in the guideline for MFB in Nigeria.
What are microfinance loans?
The Central Bank of Nigeria (CBN) defines microfinance loans as small loans granted to micro enterprises by finance intermediaries on the basis of the borrower’s cash flow.
What are the roles of Microfinance Bank?
Like the conventional commercial Banks, Microfinance Bank basically performs financial intermediation, that is, servicing or financing the Deficit Economic Unit through the resources derived from the Surplus Economic Unit and at reduced interest rate. But, unlike the commercial banks, provides financial services such as credits and financial advisory to the active poor who ordinarily would not have access to such services due to its perceived characteristic risks level.
What are the rationales for Microfinance Bank in an Economy?
The fundamental reasons for the establishment of Microfinance Banks in an economy are as follows:
- It is a poverty alleviation strategy.
- It assists the active poor in accumulating productive assets.
- It stimulates the savings culture.
- It helps the active poor to work their way out of perpetual poverty.
- It assists in general economic growth.
Who qualifies as a Microfinance Client in Nigeria?
Anyone who generally possesses the following characteristics shall qualify as a microfinance client:
- Is not a regular employee of any organization and is age is between 18 and 60 years.
- Has a monthly income of not more than twice the monthly per capita income or Nigeria Minimum Wage, whichever is higher.
- Has a total productive asset (Including those arising from loans, but excluding the cost of land) of not more than five hundred thousand Naira (N 500,000).
Must a Customer provide physical Collateral/Security when lending?
It should be noted that groups and individual guarantees are acceptable as collaterals for microfinance loans.
Can a cosigner borrow from the MFB?
The restriction prohibiting a bank from lending to someone who has co-signed or otherwise guaranteed a loan from the same bank does not apply to MFB
Are the deposits in the MFB safe and insured?
The Nigerian Deposits Insurance Commission one of the safety nets engenders the public confidence by insuring all deposits in the MFB. So, there is a high safety level in the MFB