CBN’s Role in Restoring Trust in Grassroots Banking
By Zekeri Idakwo Laruba
Confidence in financial institutions is as vital as confidence in currency. When banks fail, depositors lose not only their money but also their trust in the system. That trust is the lifeblood of financial inclusion, especially in a country like Nigeria where millions depend on microfinance banks for access to credit, savings, and small-scale investment. The Central Bank of Nigeria’s decision in July 2026 to revoke the licenses of 46 microfinance banks was therefore more than a regulatory action, it was a statement about discipline, accountability, and the future of Nigeria’s financial system.
Microfinance banking in Nigeria was introduced in the early 2000s as part of a broader push for financial inclusion. The idea was simple: extend banking services to the underserved, particularly rural communities and small businesses that commercial banks often ignored. By 2005, the sector had expanded rapidly, with hundreds of microfinance institutions springing up across the country. For many Nigerians, these banks became the first point of contact with formal financial services. They offered small loans, savings accounts, and community-based financial products that helped farmers, traders, and artisans sustain their livelihoods.
But growth came with challenges. Poor capitalization, weak governance, and regulatory non-compliance plagued the sector. Some institutions operated more like informal savings clubs than regulated banks, while others collapsed under the weight of mismanagement. The CBN periodically intervened, revoking licenses or imposing stricter requirements, but problems persisted.
By 2020, the Banks and Other Financial Institutions Act (BOFIA) was updated to…
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Read Full Article by Hafsat Ibrahim at economicconfidential.com
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