New Bank of Tanzania Regulations on Financial Consumer Protection
The Bank of Tanzania recently issued a public notice extending the statutory time limit for Microfinance Service Providers to register and submit licence applications. In this article, we provide an overview of the public notice and summarise the licence application procedures for Non-Deposit Taking Microfinance Service Providers and Savings and Credit Cooperative Societies.
Prior to the public notice (the Notice) being issued, Microfinance Service Providers (MSPs) were required to apply for registration or obtain a licence from the Bank of Tanzania (BOT) or any other regulatory body authorised by the BOT by 31 October 2020. However, the BOT has now extended the deadline to 30 April 2021 in order to provide MSPs additional time to submit applications that are compliant with the requirements provided under the law.
The Notice addresses the following MSPs:
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:
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 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.