How To Start A Microfinance Bank In Nigeria

microfinance bank in Nigeria

How To Start A Microfinance Bank In Nigeria- Microfinance bank in Nigeria is a financial institution by an individual or a group and is licensed by the Central Bank of Nigeria to carry out financial services. Microfinance banks offers the following services: savings accounts, funds transfer, insurance and loans . The major aim of a microfinance bank is to help low-income individuals , small and medium enterprises and entrepreneurs accomplish their financial goals. One major way these microfinance banks make their money is through fees and commissions they charge their clients. In this post, we would be giving you some guidelines on how to start a microfinance bank in Nigeria.

How To Start A Microfinance Bank In Nigeria

In setting up a microfinance bank , the following must be in place:

  1. A business name which should be duly registered with the Corporate Affairs Commission
  2. Get a good location to site your microfinance bank in Nigeria
  3. Get funding for start up and operation of the microfinance bank in Nigeria
  4. Get license from the central bank of Nigeria

The last point is very important. You can not proceed with your plans if you don’t have approvals from Central Bank of Nigeria. In the following paragraphs, I will show you how to successfully obtain a license from the central bank of Nigeria to start up your microfinance bank in Nigeria.

How To Obtain License From Central Bank of Nigeria To Start  A Microfinance Bank In Nigeria

3 stages are involved in obtaining a license from the CBN to set up a microfinance bank;

  1. Pre-licensing stage
  2. Approval-in-principle (AIP)
  3. Final licensing


At the pre-licensing stage, both the promoters and investors of the proposed microfinance bank would make a pre-licensing presentation to the CBN.

Approval-in-principle (AIP)

After stage 1, a formal application for license would be addressed to the CBN governor. The application letter must be backed by the following:

  • Evidence of payment of application fee to CBN
  • Proof of capital contribution by each shareholders of the proposed microfinance bank
  • Proof of minimum capital deposit in accordance to CBN guideline.
  • Proof of company name reservation with corporate affairs commission
  • A well-written business plan.
  • A copy of the Memorandum and Articles of Association (MEMART)
  • A well-written undertaking written by the bank’s promoters showing the bank will be adequately capitalized for the size and character of its business at all levels.
  • A copy of the shareholder’s agreement of the proposed microfinance bank
  • A statement of intent by each investor to invest in the bank
  • Well-written manual and policies of the bank in the following areas: Credit policy manual, Asset liability management policy, Anti-money laundering, Whistle-blowing policy, Code of business conduct and Enterprise risk management framework.
  • BVN and tax clearance certificate of each board members and shareholders of the proposed microfinance bank
  • Resume and valid identifications of the shareholders and directors of the proposed microfinance banks (duly signed).
  • Criteria For Choosing The Board Members Of The Proposed Microfinance Banks

Approval-in- principle takes about 90 days. It is after AIP has been approved by the CBN that the bank can fully register with CAC.

Final Licensing stage

After AIP approval, the bank can now go ahead to submit an application letter for a final microfinance bank license to the government. Note that this application should be made within 6 months of obtaining an AIP. The application should be backed up with the following:

  • Proof of payment of bank license fee
  • Copies of the microfinance bank’s certificate of incorporation
  • Proof of location for head office for the commencement of business activities
  • List of proposed management staff and their resumes (duly signed)
  • Board of staff training program
  • Copies of employment offers and acceptance
  • Pre-licensing inspection done on proposed microfinance bank premises done by CBN

Types of Microfinance Bank in Nigeria

In setting up a microfinance bank in Nigeria, you must first have an understanding of the types of microfinance bank present in Nigeria. This will inform your decision on the kind you will be setting up.

Unit microfinance Bank

This is the kind of bank that is permitted to be present in only one location. Such cannot have any other branch. Minimum capital to start up a unit microfinance bank is 200 million naira.

State microfinance bank

State microfinance bank is authorized to operate in only one state . Unlike unit microfinance bank, it can have multiple branches in its chosen state of interest. Minimum capital required by CBN to start this microfinance bank is 1 billion naira.

National  microfinance bank

This type of microfinance bank is authorized to operate in multiple states of the federation.

Limitations Of Microfinance Bank In Nigeria

A microfinance bank is Nigeria is not permitted to engage in the following:

  • Engage in foreign transaction
  • Accept public sector deposit
  • Funding of illegal activities e. g gambling
  • Real estate business
  • Foreign exchange funds transfer
  • Collection of third party cheques and other instruments
  • Leasing, renting or sale of any category with the directors, officers or employees without CBN approval

Top 10 Microfinance Bank In Nigeria

  1. KUDA microfinance bank
  2. LAPO microfinance bank
  3. ACCION microfinance bank
  4. Mutual trust microfinance bank
  5. Assets microfinance bank
  6. Fina trust microfinance bank
  7. AB microfinance bank
  8. VFD microfinance bank
  9. Sparkle microfinance bank
  10. Bol microfinance bank

Summary Of The Requirement For Obtaining License From CBN

  • Application directed to the CBN governor; such application should be backed up with Application fee, Deposit of capital, Detailed business plan, Copy of the memorandum of association and article of association
  • Letter of intent to pay the subscribed shares by the shareholders
  • List of promoters/ proposed shareholders and their details
  • Details of the proposed board of directors

List of Documents Promoters will submit to CBN for license approval

  • A copy of Shareholder’s register
  • A copy of the share certificate for each shareholder
  • Form CAC 2 (Return of allotment) filed with CAC
  • Form CAC 7 (has particulars of directors)
  • Letter of undertaking to adhere strictly to CBN guidelines
  • Certificate of incorporation
  • Form CAC 3 ( that shows location and address of head office and branches where applicable
  • Top management’s staff offer letter and acceptance of employment
  • An opening statement of affairs that has been audited by an approved form of accountant in Nigeria
  • Memorandum of association and articles of association filed with Corporate Affairs Commission

Final Word

In setting up a microfinance bank in Nigeria, you need to first obtain a license from the Central bank of Nigeria, register with Corporate Affairs Commission (CAC) and also ensure you comply with CBN guidelines after your license has been approved. If you go against any of the CBN guidelines, your license may be seized or withdrawn.

Frequently Asked Questions

What are some of the services offered by Microfinance bank in Nigeria

  • Savings account
  • Insurance
  • Business loan
  • Agricultural loan
  • Deposit
  • Cash transfers

What microfinance bank in Nigeria is the largest?

LAPO microfinance bank is the largest microfinance bank in Nigeria

Is there any difference between a bank and microfinance bank?

Both the conventional bank and microfinance bank offer financial services such as deposit, money transfer, loan, etc. However, microfinance bank offer smaller sizes of loans to its clients while bank offer large loans.

Does Opay operate as a microfinance bank?

Opay is a fintech company that is powered by Blueridge microfinance bank

What other name is microfinance bank called?

A microfinance bank is also known as a micro credit bank

How is microfinance bank in Nigeria being regulated?

Microfinance bank in Nigeria is regulated by the CBN and anyone that wants to start out a micro finance bank will have to obtain license from CBN.

Do microfinance bank in Nigeria give loans?

Yes. Microfinance in Nigeria give out loans known as microcredit


  • www. infoguidenigeria. com – 9 Requirements to start a microfinance bank in Nigeria.
  • www. mondaq. com- How to start a microfinance bank in Nigeria
  • www. resolutionlawng. com- 7 Requirements for setting up microfinance bank in Nigeria
  • www. nairametrics. com- Top 10 Microfinance banks in Nigeria
  • www. lexology. com – Procedures and requirements for Microfinance bank in Nigeria
  • www. tekedia. com- How to obtain a Microfinance bank license in Nigeria


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