NBE orders MFIs to increase capital tenfold


The National Bank of Ethiopia (NBE) issued a directive ordering Micro Finance Institutions (MFIs) to increase their capital tenfold by June 2018.
NBE, the regulatory body of the country’s financial institutions, instructed MFIs to increase their capital to two million birr via a recently issued directive.
Since 1996, the initial capital MFIs were required to have was 200,000 birr.
The NBE has instituted a five step process to help MFIs meet the latest requirement, according to sources. The institutions must increase their capital to 500,000 birr by June 2014 and then to one million birr by June 2015. They then need to increase their capital to 1.3 million birr and 1.6 million birr by June 2016 and June 2017, respectively, in order to meet the 2 million birr requirement by June 2018.
The directive has been extended to the MFIs.
The capital increase is intended to create vibrant, sustainable and unshakable micro finance institutions, according to stakeholders Capital talked to.
“This amount of money might have been enough to operate several years ago,” says Biniyam Tadesse, Promoter for Nisir Micro Finance S.C. “But now, this amount of money is too scant for micro finance institutions to operate,” he told Capital.
Almost all micro finance institutions have much more capital than the previously required initial capital, according to Biniyam. “Only few of them, especially those just being established might plan to start with an initial capital of 500,000 or 600,000 birr. They, then, have a long way to go to comply with the NBE’s new requirements,” he said.
The recently established Nisir has 15 million birr initial capital. Stakeholders Capital talked to said most of the MFIs, however, have an initial capital of 5 to 10 million birr.