Licence

Checklist for Obtaining a Microfinance Bank (MFB) License in Nigeria

If you’re looking to establish a Microfinance Bank in Nigeria, here’s a practical guide that breaks down the licensing process as laid out by the Central Bank of Nigeria (CBN). It’s a detailed journey that requires preparation, strategy, and full compliance with regulatory standards.

Note: Regulatory requirements can change. Be sure to consult updated CBN documents and seek expert legal and financial advice before proceeding.

Phase 1: Laying the Groundwork

1. Pick the Right License Tier: Choose the category that fits your operational goals. Each license comes with its own capital requirements and geographical reach.
   

   License Tier	Scope	Minimum Capital
   Tier 1 Unit MFB	Single location, focused on urban areas.	₦200 Million
   Tier 2 Unit MFB	Single location, serving rural or underserved communities.	₦50 Million
   State MFB	Statewide operations or within the FCT.	₦1 Billion
   National MFB	Nationwide reach, including the FCT.	₦5 Billion

2. Register Your Company: Set up a limited liability company through the Corporate Affairs Commission (CAC). Make sure the business name includes “Microfinance Bank”.
3. Create a Strong Business Plan: Your 5-year business plan should clearly present your goals and strategies. Key sections include:
   • Mission, vision, and company overview.
   • Market research and strategic positioning.
   • Organizational structure and key team members.
   • Detailed financials: profit & loss, balance sheet, and cash flow projections.
   • Product and service offerings.
   • Technology and IT infrastructure strategy.
4. Find the Right People: Appoint experienced and credible individuals to leadership roles. The CBN will vet all key personnel through a formal “Fit and Proper Persons” assessment.
5. Raise the Required Capital: Gather the full amount of capital based on your chosen license tier. All funds must come from legitimate and traceable sources.

Phase 2: Applying for Approval-in-Principle (AIP)

With your preparations in place, send a formal application to the CBN, along with the following:

• Application fee (non-refundable).
• Proof of capital deposited in a CBN escrow account.
• Business plan and feasibility study.
• Certified company documents (Incorporation Certificate, MEMART, etc.).
• List of shareholders and their ownership stakes.
• CVs, credentials, and BVNs of directors and top executives.
• Letters from the management team accepting their roles.

Phase 3: Post-AIP Steps

Once your AIP is approved (it’s valid for 6 months), you’ll need to complete the following:

• Secure an Office: Set up a proper office that meets banking standards.
• Install Core Systems: Deploy core banking software and all supporting IT infrastructure.
• Hire and Train Staff: Get your team ready with proper onboarding and training.
• CBN Inspection: Expect an on-site inspection by the CBN to assess your readiness.
• Submit Additional Docs: Provide final documentation such as employment letters, share structure, and proof of system integration (e.g., with NIBSS).

Phase 4: Final Licensing and Launch

1. Pay the Final Fee: Once cleared by the CBN, pay the final licensing fee.
2. Get Your License: The CBN will issue your full MFB license.
3. Announce Your Launch: Inform the public about your readiness.
4. Start Operations: Begin offering microfinance services to your target market.

Checklist for Obtaining a Banking License in Nigeria

Thinking about setting up a full-fledged bank in Nigeria? Here’s a breakdown of what the Central Bank of Nigeria requires, following the Banks and Other Financial Institutions Act (BOFIA) 2020. This applies to commercial, merchant, and non-interest banking models.

Important: This is a complex and costly process. It’s crucial to work with experienced professionals and stay updated on CBN regulations.

Phase 1: Pre-Application & Strategic Planning

1. Bring in Experts Early: Hire experienced legal, financial, and banking advisors to walk you through every stage of the licensing process. Their guidance will be essential.
2. Pick the Right Type of License: Decide what kind of bank you want to set up—whether it’s a national commercial bank, a regional non-interest bank, or something else. Your choice will shape the requirements you need to meet.
3. Register a Public Company: You’ll need to register a Public Limited Company (PLC) with the Corporate Affairs Commission (CAC). The word “Bank” must appear in the company name.
4. Build a Solid Business Plan: Put together a detailed 5-year business plan. It should include:
   • What the bank aims to do (mission and vision).
   • Who your customers are and how you’ll compete.
   • Where the funding is coming from—with proof.
   • A plan to manage different types of risk (credit, market, operational, etc.).
   • Financial forecasts and expected performance.
   • Your tech setup, especially cybersecurity.
   • How you’ll stay compliant with laws, including AML/CFT.
   • Profiles of your board and management team.
5. Assemble a Strong Leadership Team: Choose trustworthy and experienced people for your board and management. The CBN will review all candidates to ensure they meet integrity and competence standards.
6. Raise the Required Capital: You must show clear and credible proof that you have the minimum capital required. The CBN will thoroughly verify where the funds came from to ensure they are legitimate.

Phase 2: Application for Approval-in-Principle (AIP)

Once your foundation is in place, the next step is to apply to the Governor of the Central Bank of Nigeria. Your application should include:

• The application fee, which is non-refundable.
• Proof that the minimum capital has been raised and deposited in a CBN escrow account. This must include a sworn affidavit confirming the source of funds.
• Your detailed business plan and feasibility report.
• Certified copies of all incorporation documents from the CAC.
• A full list of promoters, directors, and shareholders—along with CVs, IDs, BVNs, and other personal info.
• Completed CBN “Fit and Proper Persons” questionnaires for all senior roles.

Phase 3: Post-AIP Requirements & Pre-Licensing Inspection

After receiving the AIP (which is typically valid for six months), you’ll need to put all operational elements in place. Here’s what that includes:

• Capital Market Activity: If your funding plan includes a public share offer, you’ll need to carry this out and get SEC approval.
• Set Up Your Physical Locations: Get your head office ready, and any branches if required. They must meet security and operational standards.
• Install IT Systems: Your core banking software, hardware, and cybersecurity infrastructure must be installed and tested.
• Hire and Train Staff: Bring on qualified personnel and make sure they’re trained across key banking functions and compliance areas.
• Document Your Internal Processes: Finalize all your policies and procedures—covering risk, operations, security, etc.
• Undergo CBN Inspection: The CBN will visit your premises to verify everything is in place—from IT systems to staffing and internal policies.

Phase 4: Grant of Final License & Commencement

1. Pay the Final Licensing Fee: If the CBN is satisfied after inspection, you’ll be asked to pay the final, non-refundable fee.
2. Receive Your License: The CBN will issue your official banking license, giving you the green light to operate.
3. Complete Final Registrations: Register with the Nigeria Deposit Insurance Corporation (NDIC), Federal Inland Revenue Service (FIRS), and join both the CIBN and the Bankers’ Committee.
4. Open for Business: You’re now ready to launch and begin offering banking services to the public.