> Posted by Jeffrey Riecke, Communications Assistant, CFI
Nigeria’s central bank recently unveiled new regulation for the country’s microfinance industry, aiming to mitigate risk while still promoting swift, sustainable growth. The news comes by way of a press release put out last week. The new regulation merits attention in the wake of the difficulties the Nigerian microfinance industry experienced just a few years ago, with the Central Bank of Nigeria revoking the licenses of 224 MFIs in late 2010.
According to the central bank, the new regulation instills measures to ensure the protection of clients and the stability of institutions. It includes how to properly document a loan, classify a portfolio, and provision against loan losses. The regulations also cover MFI establishment, operations, regulation, and supervision. Under the new guidelines, cooperation between the central bank and other relevant agencies – such as the Securities and Exchange Commission, the National Association of Microfinance Banks, and the Nigerian Deposit Insurance Corporation – is promoted.
The new regulatory framework follows shortly after the high-visibility launch of the country’s financial inclusion strategy last October. Despite having the second-largest economy in Africa, Nigeria currently lags behind other sub-Saharan countries on financial inclusion. According to the Global Findex, 30 percent of Nigerian adults have an account with a formal financial institution, compared to 54 percent in South Africa and 42 percent in Kenya. One of the 35 countries that joined the AFI Maya Declaration and made a financial inclusion commitment, Nigeria is striving to achieve 80 percent financial inclusion by 2020.
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