Nigeria’s fintechs built payments. Now they’re becoming banks.

This is Follow the Money, our weekly series that unpacks the earnings, business, and scaling strategies of African fintechs, financial institutions, companies, and governments. A new edition drops every Monday.

Fintechs built their reputation by making payments faster and replacing many physical banking functions with smartphones. Now, they are becoming banks, or at least a particular kind of bank.

This year, Nigeria’s biggest fintechs have accelerated their push into banking through microfinance bank (MFB) licences as they seek to expand beyond their core businesses into full-service financial institutions. 

In January, Paystack, the payments technology company now owned by The Stack Group (TSG), acquired Ladder Microfinance Bank. In April, Flutterwave, Africa’s largest payments startup, secured a national MFB licence through its acquisition of open banking startup Mono. 

In May, Sycamore, a financial service group with lending and asset management businesses, told TechCabal it plans to build a deposit base of more than ₦40 billion ($29.13 million) as it expands from digital lending into banking and payments after acquiring an MFB. 

An MFB licence allows fintechs to accept deposits, give loans, and earn interest income from lending, reducing their reliance on transaction fees.

But the licence does more than unlock new products. It changes the business that fintechs are expected to build. Unlike payment companies, which earn money every time customers move money, banks earn by keeping deposits, lending them out and managing the risks that come with that business. 

Yet a microfinance bank is not a commercial bank. It is a specialised banking institution with a narrower mission to mobilise deposits, lend primarily to households and small businesses, and operate within strict prudential limits set by the Central Bank of Nigeria (CBN). 

Deposits change the economics 

Payment businesses make money when customers move money. Banks make money when customers leave money behind.

Deposits become a permanent funding base. Fintechs can earn a transfer fee on customer accounts. At least ₦10 on transfers between ₦5,000 and ₦50,000, and ₦50 on those above ₦50,000, and interest income on loans. 

Customer deposits also get recycled into loans, generating interest income repeatedly from the same money. Instead of relying largely on transaction fees, fintechs with MFB licences can build recurring income from spreads between the interest they earn on loans and the cost of funding those loans. 

When Flutterwave got its national MFB licence in April, its chief executive officer, Olugbenga Agboola, told TechCabal, “$40 billion has gone through our platform. That is not double-counting, and not one cent was retained. With this new phase of life, money now stays in our platform. Margins get better.”

Compare that with Moniepoint, whose MFB licence was upgraded to a national licence in 2026. While the company processed ₦412 trillion ($297 billion) in payments in 2025, it said it also financed more than ₦1 trillion ($724.15 million) in business loans and built a deposit portfolio.

The CBN’s microfinance guidelines make clear that fintechs are not simply being allowed to collect deposits. They are expected to deploy them.

The regulator recommends that savings deposits account for at least 60% of an MFB’s funding base, while the loan-to-deposit ratios should reach 80%. Net loans should represent at least 60% of total assets, and roughly 80% of lending should go to microloans. 

These benchmarks leave little room for fintechs to hoard deposits or rely heavily on treasury investments, as commercial banks can. The regulator expects customer deposits to flow back into the real economy through lending rather than sit in low-risk assets.

The recommended maximum microloan is ₦500,000 ($362.08) for Tier 2 Unit MFBs and ₦1 million ($724.15) for other categories of microfinance banks.

SME loans can exceed ₦500,000 ($362.08) for Tier 2 Unit MFBs and ₦1 million ($724.15) for other MFB categories, but not exceed 1% of shareholders’ funds unimpaired by losses. 

The CBN recognises four categories of MFBs. Tier 1 Unit MFBs are authorised to operate in urban areas, while Tier 2 Unit MFBs serve rural, unbanked and underbanked communities. State MFBs can operate across a single state or the Federal Capital Territory (FCT), while national MFBs can operate in multiple states, including the FCT. 

The regulator expects every classified loan to be fully provided for, with loan-loss provisioning at 100%, and loan officers to actively manage between 250 and 300 borrowers. Loans should be followed up on within seven days of disbursement, with repayments expected weekly in most cases.

Growth comes with limits

To protect depositors, national MFBs must maintain a minimum paid-up capital of ₦5 billion ($3.62 million), while state MFBs require ₦1 billion ($724,150). That is a fraction of what the CBN requires from commercial banks. 

International banks must hold at least ₦500 billion ($370.58 million) in paid-up capital, national banks ₦200 billion ($148.23 million), and regional and merchant banks ₦50 billion ($37.06 million) each.

The gap reflects the different roles these institutions are designed to play. While commercial banks are expected to finance large corporates, participate in foreign exchange markets and offer a broad range of banking services, MFBs are specialised lenders focused on mobilising deposits and extending credit to households and small businesses.

The licence limits how fintechs can use customer money.

Unlike payment companies, which can reinvest most of their earnings into growth, microfinance banks must hold back part of their balance sheet. The CBN requires MFBs to maintain a minimum capital adequacy ratio of 10% and keep at least 20% of their assets in liquid form to meet customer withdrawals. Investments in treasury bills must stay between 5% and 10% of assets, and equity investments in other businesses are capped at 7.5%.

The CBN expects MFBs to generate most of their income from lending, with about 80% of gross income coming from interest rather than fees, while keeping operating expenses below 15% of total assets. That is a significant departure from many fintech business models, where payments, transfers, and merchant services generate most revenue, and growth often comes with rising operating costs.

The guidelines prohibit foreign exchange transactions, international electronic fund transfers, international corporate finance, clearing house activities, speculative property transactions, and any business outside those specifically approved by the CBN. 

Although many fintechs already hold other licences that allow some of these services, the restrictions illustrate that an MFB licence is not a licence to do everything a bank can do. Instead, it is designed to keep institutions focused on their core role of taking deposits and lending them back into the real economy. 

State MFBs are required to maintain physical operations within their licensed states, while national MFBs are expected to establish physical footprints across the states where they operate. Branch expansion itself requires regulatory approval, while pricing transparency, audited financial reporting, and regular regulatory disclosures are all mandatory.

After receiving approval to operate as a national MFB in January, Kuda, a Nigerian neobank, said it planned to open more experience centres to support customers and strengthen community engagement.

Nigeria’s fintech revolution began by helping people move money more efficiently than traditional banks. The next phase may depend less on how efficiently they move money than on how responsibly they keep and lend it.

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