Nigeria’s fast-growing digital banks are being nudged closer to the brick-and-mortar realities of traditional finance, and Kuda Microfinance Bank is the latest to feel that pull. Following its approval by the Central Bank of Nigeria (CBN) to operate as a National Microfinance Bank, the fintech is preparing to expand its physical footprint across the country, even as it maintains a digital-first strategy.
The national licence marks a significant upgrade from Kuda’s former unit microfinance bank status, which restricted its physical operations to a single geographic area. While Kuda’s services have always been accessible nationwide through its app, the new regulatory status comes with an expectation of broader on-the-ground presence. In response, the bank says it plans to open additional experience centres aimed at customer support and community engagement.
According to Kuda’s management, the licence is both a regulatory milestone and an operational shift. It removes geographic limits on physical activities while placing the bank under stricter supervisory and disclosure requirements. National microfinance banks are expected to meet higher standards of transparency, including the publication of annual accounts in national newspapers, and to operate within a more demanding compliance framework.
Kuda’s upgrade fits into a wider push by the CBN to align licensing categories with the actual scale and reach of Nigeria’s largest fintechs. In late January 2025, the regulator also upgraded the microfinance licences of other major players such as Moniepoint and OPay. The apex bank has said these changes are intended to ensure that fintechs serving millions of customers—many of them in the informal sector—can provide physical offices nationwide where users can walk in to resolve complaints or seek assistance.
The shift, however, is not without trade-offs. National licences come with higher operating costs, including spending on branches, staffing, and compliance—areas that digital banks have historically minimised to keep services cheaper and more agile than those of traditional banks. For fintechs like Kuda, the challenge will be balancing this heavier cost structure with the efficiencies that made digital banking attractive in the first place.
Regulatory guidelines also hint at what expansion might look like. While the CBN does not clearly spell out a direct upgrade path from unit to national microfinance banks, it requires state microfinance banks seeking national status to operate at least five branches. This benchmark underscores Kuda’s intention to roll out multiple offices in the coming months, subject to regulatory approval. Opening any branch without prior CBN consent attracts a ₦2 million fine, reinforcing the regulator’s tight oversight.
The financial implications of the upgrade are equally significant. Kuda’s minimum paid-up capital requirement jumps from ₦200 million as a unit MFB to ₦5 billion as a national MFB. The bank appears well-positioned to absorb this increase, having raised $20 million in 2024 at a reported valuation of $500 million.
Operationally, Kuda says digital banking will remain at the centre of its offering. The bank will continue to focus on transfers, payments, savings, and instant credit, while adding physical touchpoints where customers prefer in-person interaction. In the first quarter of 2025, Kuda processed over 300 million transactions worth ₦14.3 trillion across its retail and business banking segments, and issued ₦16.4 billion in overdrafts—a 43% increase from the previous quarter.
As Nigeria’s fintech sector matures, Kuda’s licence upgrade highlights a broader evolution: digital banks are no longer operating solely in virtual space. With regulators pushing for stronger consumer protection and accessibility, the next phase of growth may depend as much on physical presence as on sleek apps and seamless user experiences.