CBN’s Cash Limit Policy Shift: What it Means for Nigerian Fintechs Like Kuda and Carbon
The Central Bank of Nigeria (CBN) has enacted a significant policy adjustment, granting microfinance banks (MFBs) and mortgage banks an exemption from paying processing fees on cash withdrawals that exceed the established limits. This strategic decision, communicated via a circular dated July 31, 2023, is specifically designed to reinforce these institutions’ vital work in extending financial access to underserved communities across the nation. Crucially, while these banks are now exempt from the fees, they are still required to strictly adhere to the existing cash withdrawal thresholds.
Navigating the New Landscape: Implications for Digital Banking and Financial Inclusion
This latest CBN directive underscores the pivotal role microfinance and mortgage banks play in Nigeria’s broader financial inclusion objectives. The background to this policy lies in the CBN’s cash withdrawal limits introduced last year as part of its now-controversial currency redesign initiative. Under those regulations, individuals can withdraw up to N500,000 weekly across all banking channels, with any amount beyond this incurring a 3% processing fee. For corporate entities, the weekly limit is N5 million, and exceeding this threshold attracts a 5% charge. Furthermore, both individuals and organizations seeking to withdraw above their respective limits must still present specific documentation, a requirement that remains in place. For prominent Nigerian fintechs like Kuda and Carbon, many of whom operate either directly as or through partnerships with microfinance banks, this exemption is particularly impactful. It potentially eases the friction for their customers who might still rely on cash for various transactions, especially in regions where digital payment infrastructure is less prevalent. By removing the financial penalty for large cash withdrawals from MFBs, the CBN aims to facilitate seamless operations for institutions focused on reaching the unbanked and underbanked, thereby fostering greater participation in the formal financial system.
Ultimately, the CBN’s decision to waive processing fees for microfinance and mortgage banks is a focused effort to deepen financial inclusion across Nigeria. Though the fundamental cash withdrawal limits persist, the elimination of associated charges empowers MFBs and, consequently, the fintech companies operating within or alongside this framework, to more effectively cater to their diverse customer base. This policy highlights the CBN’s ongoing dedication to cultivating a more inclusive financial environment, bridging the divide between conventional banking and Nigeria’s rapidly expanding digital finance sector.
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