Bolatito Mercy
The Central Bank of Nigeria has revoked the operating licences of 46 microfinance banks for failing to comply with regulatory requirements, in one of the largest enforcement actions against the sub-sector in recent years. The CBN said the affected institutions had remained inactive, failed to meet minimum capital thresholds, or breached key prudential and reporting obligations over an extended period. The move is part of the apex bank’s broader effort to clean up the microfinance space and restore public confidence in small-tier deposit-taking institutions.
Microfinance banks are licensed to serve the unbanked and underbanked, particularly traders, artisans, farmers, and small businesses that fall outside the reach of commercial banks. Because they operate with lower capital and in more vulnerable communities, the CBN subjects them to stricter monitoring on governance, capital adequacy, and asset quality. When institutions become dormant or repeatedly violate rules, the regulator argues that keeping them on the register poses risks to depositors and undermines the integrity of the financial system.
According to the CBN, many of the 46 banks had either ceased operations without formal closure, could not be located at their registered addresses, or had not rendered returns to the regulator for months. Some were also found to have impaired capital that fell below the minimum prescribed for their category, meaning they lacked the buffer to absorb losses. In those cases, the apex bank concluded that continued operation would expose customers to the possibility of lost savings with little prospect of recovery.
The revocation means the affected MFBs must immediately stop taking deposits, granting loans, or presenting themselves as licensed financial institutions. The Nigeria Deposit Insurance Corporation is expected to step in to verify deposit liabilities and begin the process of reimbursement to insured depositors, up to the coverage limit. For uninsured balances, resolution will depend on the outcome of liquidation and the value of assets that can be realized from the failed banks.
Analysts say the exercise reflects a tougher supervisory stance from the CBN under its mandate to strengthen financial stability. The microfinance sector expanded rapidly over the last decade, with hundreds of licences issued across urban and rural areas. However, weak internal controls, poor risk management, and limited capacity have led to a high rate of distress in the tier. The regulator has signaled that it will no longer tolerate “briefcase” or shell MFBs that exist only on paper.
For legitimate microfinance operators, the clampdown could be a net positive. A cleaner register reduces unfair competition from non-compliant players and may make it easier for stronger MFBs to attract funding, partnerships, and fintech integrations. It also sends a message to investors and depositors that only institutions meeting CBN standards will be allowed to remain. Some industry players have called for more support, such as capacity building and access to wholesale funding, to help viable MFBs meet the higher bar.
Depositors of the affected banks are being advised to contact the NDIC with proof of deposits to begin claims verification. The corporation typically publishes details of the liquidation process, including timelines and payment channels. Customers who banked with multiple small institutions are urged to confirm the status of each bank to avoid disruptions, especially ahead of festive or agricultural seasons when cash flow is critical.
Overall, the CBN’s action underscores the regulator’s priority of safety and soundness over sheer numbers of institutions. While the closure of 46 MFBs may cause short-term inconvenience in the communities they served, the central bank maintains that a smaller, well-regulated microfinance sector will be more effective at delivering financial inclusion without exposing Nigerians to undue risk.
