Draft Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations 2024

The Bank of Tanzania (BOT) has published the draft Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations 2024 (Draft Regulations) intended to replace the Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations 2019 (2019 Regulations).

The Draft Regulations introduces various changes compared to the 2019 Regulations, in brief, include the following provisions:

• The Draft Regulations have added the term “Financial Solutions” to be used in the name of the Microfinance Service Provider (MSP) (Draft Regulation 7). The 2019 Regulations only required the use of terms like “microfinance”, “finance”, “financial services”, “credit” or “microcredit” in the MSP business name.
  
• BOT to consider reports from Credit Reference Bureau in considering integrity of shareholders, proprietors, partners, or trustees in assessing application for conducting microfinance business (Draft Regulation 9).
  
• BOT to assess the financial capacity of Tier 2 MSP applicant by looking at the statement of financial position or bank statement (Draft Regulation 10). The 2019 Regulations required looking at:
  • Net worth;
  • Level of capital as shown on the balance sheets; or
  • Potential financial support that may be made available when the microfinance service provider requires capital injection.
    
• MSP to obtain approval from BOT before appointment of its Chief Executive Officer or Member of Governing Body (Draft Regulation 13).
  
• Non transferability of the licence issued to MSP (Draft Regulation 15). This prohibition was not included in the 2019 Regulations.
  
• The Draft Regulations have removed the mandate of the BOT to direct a Tier 2 MSP to transform to Tier 1 when it is satisfied that the MSP is sustainable and meets transformation criteria (Regulation 16(2) 2019 Regulations).
  
• MSP to seek approval from the BOT before change of ownership (Draft Regulation 22).
  
• Removal of prohibition of MSP to do activities like Payment orders and transfer of funds (prohibited by Regulation 25 2019 Regulations).
  
• The financial year of MSP remains to be 1 January to 31 December every year (Draft Regulation 27(3)).
  
• Reduced minimum liquid assets required to be maintained by MSP from not less than 5% of its total assets to not less than 1% of its total outstanding gross loans (Draft Regulation 48(1)).