THE Bank of Tanzania (BoT) has extended time for microfinance institutions to acquire microfinance licences to the end of April next year.
The deadline for applying for microfinance licences was extended for six months to April 30, 2021 instead of October this month.
“BoT believes that the period extension will be sufficient for all microfinance institutions to apply while meeting all legal requirements and regulations,” noted a statement issued by BoT.
The Microfinance Act, 2018 became effective from November last year and mandated BoT to start issuing licences to microfinance institutions, previously, a sub-sector, which was largely unregulated.
Below is an analysis by Tenda Msinjili and Amreen Ayub of www.clydeco.com, about the microfinance licence applications
Microfinance tiers and application procedures
The Notice addresses the following MSPs:
- Tier 2 MSPs which relate to Non-Deposit Taking Microfinance Service Providers (NDTs)
- Tier 3 MSPs which relate to Savings and Credit Cooperative Societies (SACCOS)
- Tier 4 MSPs which relate to Community Microfinance Groups (CMGs)
Licence applications must be submitted at the BOT’s Head Office in Dar es Salaam or its branches in Arusha, Mwanza, Zanzibar, Mbeya, Mtwara and Dodoma. The Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations of 2019 (the NDT Regulations) apply in this regard. NDTs’ business names must include the words “microfinance”, “finance”, “financial services”, “credit” or “microcredit”.
A licence application must be in the prescribed form accompanied by documents such as the latest financial statements, lending policy, approval of home country regulator for foreign applicants and all the information required under regulation 6 and the Second Schedule to the NDT Regulations. Additionally, a training and succession plan for Tanzanian staff is mandatory in applications by foreign-owned NDTs. Both Tanzanian and foreign applicants must pay a non-refundable application fee of TZS 500,000 for an entity and TZS 300,000 for an individual.
Key points regarding the NDTs licence:
- The BOT shall determine the application within 60 days and, if satisfied, issue a licence
- The BOT may inspect the business premises of the NDTs before issuing the licence
- NDTs are required to commence business within six months from the date the licence is issued, failure of which renders the licence expired
- The BOT may, in writing, extend the time for NDTs to commence business
- The licence remains in force unless suspended or revoked by the BOT
Licence applications must be submitted to the office of the Registrar of Cooperative Societies in the respective region (the Registrar) through the Tanzania Cooperative Development Commission licence application system. The regulating law in this regard is the Microfinance (Savings and Credit Cooperative Societies) Regulations of 2019 (the SACCOS Regulations). There is no specific requirement which states that there should be SACCOS related terms in the name of the company.
A SACCOS is issued with a licence in either category A or B which differ by factors such as business activities and minimum capital requirements. A licensee under category A must commence operations and maintain a minimum core capital of TZS 10,000,000, while a category B licensee is required to have a minimum core capital of TZS 200,000,000.
A licence application shall be accompanied by the required documents listed under regulation 5 of the SACCOS Regulations, respective of the specific category applied. The applicant must also pay a non-refundable application fee of TZS 100,000 for category A and TZS 300,000 for category B.
Key points regarding the SACCOS licence:
- The Registrar shall determine the application within 60 days and, if satisfied, issue a licence
- The BOT may inspect the business premises of the SACCOS before issuing the licence
- The SACCOS must commence business within six months from the date from the date the licence is issued failure of which renders the licence expired
- The Registrar may, in writing, extend the time for the SACCOS to commence business
- The licence shall remain in force unless suspended or revoked by the Registrar
The Microfinance Act prohibits any person from conducting microfinance business without a licence. NDTs that are in contravention of this requirement after 30 April 2021 shall attract a fine of between TZS 20,000,000 and TZS 100,000,000 and / or imprisonment for a term of between 2 and 5 years. An unlicensed SACCOS shall be liable to a fine of between TZS 10,000,000 and TZS 50,000,000 and / or imprisonment for a term of between 2 and 5 years.