Thursday, June 29, 2006

Invest in Micro Finance and Community Banking in Nigeria

The year 2005 was designated the year of micro finance/credit by the United Nations. With less than 40% of Nigerians having access to formal banking services, it is apparent that Nigeria is underserved in the banking and financial sector.

Despite the 25 billion Naira capital requirement needed to set up commercial banks, there is room for private participation in the banking sector via Community Banking or Micro Finance Banks(MFB).

The Central Bank of Ngeria, the apex banking agency is the country is pushing for the establishment of private sector-driven MFBs and has disclosed the rationale and requirements in this policy paper (Dec. 2005, PDF): Microfinance Policy, Regulatory and Supervisory Framework in Nigeria.

With as little as a 20-million-Naira-capital-base per branch, interested investors can set up MFB in any local government area in Nigeria. One billion Naira permits the MFB to have branches statewide. I must clarify that the operations of a MFB is not limited to micro financing- a license permits the bank engage in all aspects of banking and provision of financial services with the exception of dealing in foreign exchange or currency transactions.

There is about 60% economically productive Nigerians ready to be served; this offer represents a fantastic opportunity for diasporic Nigerians to invest in the country.

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