BoT extends registration period for microfinance

The Bank of Tanzania (BoT) in consideration of the stakeholders’ requests has revised the deadline for submitting li- censing applications for microfinance institutions in the country.
BoT has extended the deadlines for compliance with the requirements of the relevant laws and regulations by the end of April, 2021 to prevent microfinance institutions business from being shut down.
“Therefore, on behalf of the Finance and Planning Minister, I would like to inform the public that the deadline for submitting applications for registration or licenses for microfinance institutions has extended to April 30, 2021,” said BoT Governor, Prof. Florens Luoga in a statement.
“The expectation is that the ex- tension will enable microfinance institutions in all areas (Tiers) to make adequate preparations and submit completed applications that meet the requirements of the Act and Regulations.”
Microfinance Act 2018 be- came effective 1st November 2019 and gave BoT the man- date to license, regulate and su- pervise financial institutions.
As per the law, December 2019, the central bank issued a public no- tice directing MFIs to comply with the new regulation as per section 57of the Microfinance Act 2018. The section require all people who are engaged in microfinance business to obtain formal license from BoT or delegated authorities and observe other requirements of the Regulations, within 12 months of
the date of commencement of the Act. The Central Bank has directed Non-Deposit Taking Microfinance Service Providers (Tier2) to sub- mit their license applications to the BoT Headquarters or to its branches located in Arusha, Mwanza, Zanzi- bar, Mbeya, Mtwara and Dodoma. Savings and Credit Cooperatives Societies (SACCOS) (Tier3) have been directed to submit their li- cense applications to the office of the registrar of regional cooperative societies, through the application process for the license of the coop- erative development commission. According to Prof. Luoga, com- munity microfinance groups (Tier4) should submit their ap- plication for registration at the nearest local government offices. However, the central bank has warned the public against mis-
leading advertisements and directives made by un- scrupulous individuals.
It also urges the public to dis- regard any advertisements and instructions regarding the li- censing or registration of sub- contractors that do not come from the relevant authority.
In addition, citizens are advised to contact the relevant authori- ties when they encounter various challenges in the process of ap- plying for a license or registration of microfinance finance services.
According to BoT, the mi- crofinance sector is huge, but it has traditionally been in- formal with inappropriate guidelines and transparency.
Financial sector is the heart of the country’s economy. About 55 per cent of the people ac-
cessing financial services get it from microfinance institu- tions. This shows there is still a huge opportunity for growth.
The big challenge facing the MFIs in the country is the lack of lending capital. This is be- cause banks charge 18 per cent interest for the loan taken. This becomes difficult for MFIs to take loans for on-lending.
According to Altemius Millinga, Executive Director at Yetu Microfinance Plc, the MFI has to give collateral at the bank but when lending gets no security for assured recover of money lent out.
“MFIs should use TAMFI to find a way where we can improve intermediation between commercial banks and MFIs,” he said