From Deregulation to Wholesale Lending Revival: A Turning Point for Microfinance Institutions

Nu’man Yousif Mohammed
On 10 August 2026, the Central Bank of Sudan issued a circular to all banks and microfinance institutions on providing microfinance and wholesale finance. The circular also cancelled the circular issued on 30 December 2020 regarding the fulfilment of governance requirements by institutions operating in the microfinance sector.
At first glance, the decision may seem like a limited regulatory measure. In reality, however, it carries important implications for the future relationship between banks and microfinance institutions, particularly given the exceptional circumstances facing the Sudanese economy and the significant decline in resources caused by the war, which has severely constrained microfinance institutions’ ability to access new funding lines.
From the Governance Gateway to the Creditworthiness Gateway
Over the past few years, microfinance institutions’ access to bank financing has, in practice, been linked to meeting governance requirements and obtaining a letter confirming compliance. Governance therefore became, despite its importance and necessity, a regulatory prerequisite for accessing finance.
The equation appeared to be:
Fulfil the governance requirements;
Obtain the relevant letter;
Gain the possibility of accessing bank finance.
The new circular shifts the relationship towards a different approach. It emphasises that banks must assess the risks of financing microfinance institutions, verify their creditworthiness, and ensure they comply with applicable regulatory requirements before deciding whether to provide finance.
This is where the change matters. The Central Bank of Sudan has not abolished governance, nor has it diminished its importance. Rather, it has removed the requirement for a formal letter confirming fulfilment of governance requirements as a mandatory gateway to financing, giving banks greater scope to exercise their own credit judgement in assessing institutions and making appropriate financing decisions.
This represents a shift from permission-based regulation to risk- and creditworthiness-based assessment.
Why Has the Decision Come at Such an Important Time?
Microfinance institutions today face a challenge that goes beyond inadequate capital. One of their greatest difficulties is the disruption of wholesale funding channels, which enable institutions to recycle resources, expand portfolios, and reach owners of small and micro-enterprises.
An institution may have the expertise, geographical reach, customer base, operational systems, and perhaps a portfolio capable of substantial growth. Yet, it cannot expand if it cannot access new sources of funding.
The result is a vicious cycle:
Limited resources → reduced financing → declining activity and revenue → weaker institutional development capacity → greater difficulty accessing finance → further weakness.
The Central Bank’s move is therefore particularly significant because it removes one of the regulatory obstacles that had stood between microfinance institutions and banks.
Removing the Restriction Does Not Mean Finance Is Guaranteed
Nevertheless, a professional reading of the circular requires us to distinguish between two things.
Removing the requirement for a letter confirming fulfilment of governance requirements does not mean that banks are now obliged to finance microfinance institutions. Credit decisions will remain subject to each bank’s assessment of the institution, its risks, its repayment capacity and its compliance with the applicable regulations.
The ball is therefore now in the court of both microfinance institutions and banks.
An institution can no longer simply say, “I have a governance-compliance letter.” It must instead present the bank with a convincing credit file demonstrating that it is creditworthy and capable of managing and repaying the resources it receives.
The Next Challenge: Creditworthiness and Adequate Security
This is where the more difficult phase begins.
If the previous challenge was fulfilment of governance requirements, the new challenge will be, to an even greater extent, creditworthiness and the adequacy of security.
A bank providing a wholesale funding line will not look merely at the institution’s legal form or the completeness of its management structure. It will ask questions that are much more closely connected to risk:
Is the institution capable of repayment?
How sound is its financing portfolio?
What is its level of non-performing finance?
How does it manage credit risk?
What is the size of its equity?
What is its capacity to absorb losses?
What are its sources of repayment?
What cash flows are expected?
What security is available?
How adequate is that security to cover the financing obligation?
Microfinance institutions therefore need to understand that obtaining finance will not simply result from removing a regulatory requirement. It will result from building genuine credit confidence with the bank.
From a “Governance Letter” to a “Confidence File”
This is the shift that microfinance institutions need to absorb.
In the past, the central question was:
“Has the institution fulfilled the governance requirements?”
The question that will become more important to the bank is:
“Is this institution worthy of financing?”
The difference between the two questions is substantial.
Creditworthiness is not built through regulations alone. It is built through financial performance, portfolio quality, institutional discipline, transparency, managerial capacity, risk-management systems, credit history, cash flows and efficient use of resources.
Security, meanwhile, should not be viewed merely as a document submitted to the bank. It should be regarded as part of the credit-protection framework that enables the bank to manage financing risks.
An Opportunity to Rebuild the Wholesale Finance Market
If the circular is handled properly, it could mark the start of revitalising Sudan’s wholesale finance market.
Specialised microfinance institutions constitute an important link between banking resources and groups that banks find difficult to reach directly, particularly owners of small and micro-enterprises, farmers, producers, artisans, women and young people.
Financing microfinance institutions should therefore not be viewed merely as a loan to a financial institution. Rather, it should be regarded as a channel for delivering finance to broad segments of the real economy.
This is particularly important during economic recovery and reconstruction, when thousands of small businesses need working capital and productive finance more than they need theoretical programmes or temporary initiatives.
What Is Needed Now: Moving from the Decision to Implementation
The circular is an important step, but it is not the end of the road.
The next stage requires clear cooperation between the Central Bank of Sudan, commercial banks and microfinance institutions to establish a practical mechanism for revitalising wholesale finance.
It may be useful to develop a unified framework to help banks assess microfinance institutions, incorporating clear indicators covering:
creditworthiness;
portfolio quality;
capital adequacy;
risk management;
governance;
cash flows;
security and its adequacy.
At the same time, microfinance institutions should prepare for this new phase by rebuilding their credit files, improving their financial data, raising the quality of their reporting, addressing weaknesses in their portfolios, developing their risk-management systems and reviewing their security structures.
Conclusion
The Central Bank of Sudan’s circular issued on 10 August 2026 could represent an important step in the right direction. It removes a regulatory restriction that had hindered microfinance institutions’ access to bank financing and shifts greater responsibility for the decision towards the direct credit relationship between the bank and the institution.
But the success of this step will not be measured by the number of circulars issued. It will be measured by the number of funding lines that actually return to microfinance institutions, and by the volume of resources that flow from them into small and micro-enterprises.
One gateway has now been removed. But the next gateway is creditworthiness, and its keys are repayment capacity, sound performance and adequate security.
This is where microfinance institutions’ responsibility begins: moving from the search for “a letter permitting access to finance” to building an institution that deserves to be financed.
In my view, this is the most important step towards restoring microfinance to its developmental role during Sudan’s economic recovery.

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