Microfinance banks’ credit filings rise 38.4% in Q1

NIGERIA’S microfinance banking sector recorded stronger credit activity in the first quarter of 2026, with financing-statement filings by microfinance banks (MFBs) rising 38.4 percent year-on-year to 22,977 from 16,600 a year earlier.

The filings represented 84.6 percent of the 27,170 filings made by all creditor categories during the quarter, including deposit money banks (DMBs), finance houses, mortgage banks and other non-bank financial institutions.

Although the MFB share declined from 94.1 percent in Q1 2025 to 84.6 percent in Q1 2026, the reduction reflected stronger growth in DMB filings rather than weaker MFB activity.

MFB filings also increased steadily during the quarter, rising from 6,110 in January to 8,045 in February and 8,822 in March.

The performance underscores the continued role of MFBs in extending formal credit to individuals and businesses with limited access to conventional banking services, particularly micro, small and medium-sized enterprises (MSMEs), traders, farmers and low-income households.

The stronger activity came amid increased regulatory scrutiny of the microfinance banking industry.

On July 1, 2026, the Central Bank of Nigeria (CBN) revoked the licences of 46 MFBs that failed to meet regulatory requirements.

The affected institutions were cited for deficiencies including insolvency, assets below liabilities, prolonged inactivity, closure of operations, failure to commence operations within the stipulated period and inadequate capital.

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The action could temporarily reduce the number of institutions serving some communities and cause disruption for affected customers. Over the longer term, however, it could strengthen the sector by removing weak institutions, protecting depositors and encouraging surviving banks to maintain higher standards of capitalisation, governance, risk management and reporting.

MFBs are expected to remain central to Nigeria’s financial-inclusion strategy because of their ability to provide relatively small loans to borrowers often underserved by conventional banks.

Their expansion is also important to efforts to increase financing for MSMEs, which account for a significant share of economic activity and employment.

However, high funding costs, weak risk-management capacity, limited digital infrastructure, inadequate borrower information, repayment risks and low financial literacy could constrain the sector’s growth.

Stronger credit-information systems and digital identity infrastructure would improve lenders’ ability to assess borrowers and manage credit risks.

Greater collaboration between MFBs and fintech companies could also expand digital lending and reduce transaction costs, while targeted capacity-building could strengthen smaller institutions.

For the CBN, continued risk-based supervision, consistent enforcement of capital and governance requirements and consolidation where necessary could help ensure that the sector expands without compromising financial stability.

Stronger credit information, digital infrastructure and regulation would enable MFBs to deepen credit penetration while protecting depositors and supporting entrepreneurship, employment and broader economic growth.