Yemeni Central Bank Raises Minimum Capital for Microfinance Banks to 15 Billion Riyals
(AWP) - The Central Bank of Yemen announced an increase in the minimum paid-up capital of banks, including all licensed microfinance banks, to 15 billion Yemeni riyals (about 60 million US dollars) “to govern the monetary sector and combat money laundering.”
In a statement posted on its official website, the Yemeni Central Bank in Aden called on banks to fulfill the minimum capital requirement within two years starting from 2024 with each microfinance bank required to reach 50% of the required increase within the first year.
Mohammed Abdulrahman al-Samei, an official at the Yemeni Ministry of Finance office in Taiz, said, “The purpose of this decision taken by the Central Bank of Yemen in Aden, is to govern the monetary sector within the Republic of Yemen, and then also to combat money laundering. It will certainly lead to enhancing the capabilities of microfinance banks, and simultaneously it will maintain the strength of the Yemeni currency against other foreign currencies.”
The period for the concerned banks to fulfill the approved financial obligation ends on December 31, 2025.
Fawzi Faraj al-Tawi, Investment Manager at Bin Dowal Microfinance Bank in Mukalla, explained that “the amount of financing as stated by the Central Bank, is linked to the capital in a certain percentage to the highest financing amount.”
He explained, “Now when the capital is increased, there will consequently be a greater ability to provide financing in larger amounts, and thus bring a new segment into this market. Of course, one of the most important reasons for this segment is to support economic and social development in the region as well.”
However, Yemeni banking expert, Abdulsalam al-Shujaa, expressed doubt about the ability of targeted banks to fulfill the financial obligations within the timeframe set by Yemen’s Central Bank.
He said, “The decision to raise the capital amount to 15 billion may require a period of time. This may make it difficult for many microfinance banks to complete the capital within a period of two years.”
Al-Shujaa added, “The decision stipulated that it should be during the next two years 2024-2025 for banks to complete or fulfill the capital or link the license to fulfilling the capital requirement. Therefore, this may affect and hinder many banks, especially new emerging banks.”
The decision stipulates that those holding a preliminary license to operate as microfinance banks must fulfill 50% of the required increase in paid-up capital, before receiving the final licensing approval and fulfilling the remainder of the required increase during the next year.
The new measure also grants licensed banks the right to use their reserves after prior written approval from the Central Bank to meet the minimum paid-up capital, stressing that no bank will be granted or retain a license unless it meets the minimum required capital.
The Central Bank explained that this decision is part of efforts to strengthen the financial position of microfinance banks, and enhance the quality of their services, especially in light of the current circumstances and developments in the financial and banking services sector in Yemen.