The Central Bank of Nigeria unsheathed its regulatory blade on Tuesday, cancelling the operating licences of 46 microfinance banks in a sweeping clean-up that exposed the fragility of a popular fintech tactic: buying dormant banking charters and hoping to bring them to life.
Among the licences terminated, effective immediately, were several that had been acquired by technology companies seeking a faster route into the country’s lucrative deposit and lending markets. Verdant MFB (the banking unit of the Verdant Capital group), Casha MFB, Ourpass MFB, Creditville MFB, Now Now Digital MFB and a microfinance entity recently purchased by the investment platform Sycamore were all on the list. Their presence underscored how a generation of fintechs has viewed a microfinance bank (MFB) licence less as a living financial institution and more as a regulatory key — one the CBN is now showing it can snap with little ceremony.
The regulator cited five grounds for revocation, including insufficient assets to meet liabilities, cessation of operations, failure to begin business within 12 months of licensing, and the all-too-common offence of failing to keep minimum capital unimpaired by losses. Governor Olayemi Cardoso approved the deletions under the Banks and Other Financial Institutions Act, describing them as part of “ongoing efforts to safeguard the stability of the financial sector, protect depositors, and ensure that licensed institutions comply with current laws.” Dry though the language is, the message to the country’s ambitious startups was blunt: a banking licence is not a dormant shell you can buy, brand with an app, and present as a full-service bank without actually doing the banking.
Sycamore, a consumer lending and asset management group, confirmed that one of the revoked entities was a microfinance bank it had recently acquired in Kano State as part of a “planned expansion into deposit-taking and payments.” The company said it was still integrating the unit into its operational infrastructure when the licence was swept up in the CBN’s review. Sycamore rushed to reassure customers that its other operations — a consumer lending platform under the Federal Competition and Consumer Protection Commission and an investment management arm licensed by the Securities and Exchange Commission — were unaffected. “All customer funds and investments are secure and fully accessible,” the company said, a phrase that, while necessary, also neatly encapsulated the awkwardness of having one’s freshly purchased banking charter declared dead before it had even taken a breath.
The episode fits a larger pattern. Over the past two years, Nigeria’s most prominent fintechs have scrambled to obtain microfinance bank licences, not by building them from scratch but by acquiring existing institutions — often tiny, rural unit MFBs — and then applying for upgrades to state or national status. Moniepoint, OPay, PalmPay, Flutterwave, Kuda Bank and Paga all successfully navigated this path, securing national MFB permits that allow deposit-taking and lending across all 36 states. Their heavy capitalisation and demonstrable transaction volumes gave the CBN comfort that these were real banking operations.
Yet for every one that crossed the finish line, several more appear to have treated the acquisition as sufficient on its own. The notion that merely holding a piece of paper titled “Microfinance Bank Licence” constitutes a banking business is a fantasy the CBN punctured with Tuesday’s list. Casha MFB had marketed a sleek digital savings app; Ourpass pitched a one-click business account for SMEs; Creditville mixed technology with retail credit; Verdant MFB sat within a larger alternative-investment group. All are now stripped of their banking charters, their names appended to the same list as community lenders in remote towns that had simply ceased to function.
A microfinance banking charter remains the most practical route for a Nigerian fintech to move beyond payments and into deposit-taking, reducing its reliance on partner banks and capturing float income. But as the CBN’s latest action demonstrates, buying the shell is the easy bit. Keeping it alive requires capital reserves, genuine financial intermediation, and a permanent state of regulatory good behaviour. The 46 revoked licences are, in a sense, a registry of shortcuts that turned out to be dead ends. For the digital lenders that remain, the lesson seems simple: a banking licence cannot be piggybacked; it must be fed.