Regulations 4 and 5: Establishment and name of microfinance
service provider
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A microfinance business under Tier 2 can either be established
as:
- a company under the Companies Act,
2002
- a business name under the Business
Licensing Act, 1972 (for individual money lenders)
The business name of every microfinance service provider must
contain the words; 'microfinance', 'finance',
'financial services', 'credit 'or
'microcredit'.
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Regulation 46: Minimum capital
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Tier 2 microfinance service providers must commence business and
at all times maintain a minimum capital of TZS 20 Million (approx.
USD 8,700) or higher.
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Regulation 21: Permissible activities
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Microfinance service providers under Tier 2 shall carry out the
following activities:
- issue microfinance loans
- issue housing microfinance
products
- provide loan disbursement services
for the delivery of credit programme
- maintain and operate various types of
accounts with banks and financial institutions in Tanzania
- operate micro leasing facilities,
microfinance related hire-purchase and arrangement of consortium
lending and supervision of credit schemes
- provide professional investment
advice
- micro insurance as an agent of
insurers
- equity investment
- agent banking
- such other activities as may be
authorised by the BoT
Tier 2, microfinance service providers in Tanzania, cannot
perform any activity outside of the above, without the BoT's
approval.
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Regulation 22: Prohibited activities
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Unless authorised by the BoT, a licensed microfinance service
provider under Tier 2 shall not:
- accept any type of deposits
- engage in foreign exchange
business
- engage in foreign trade
operations
- engage in trust operations
- accept credit and debit cards
- engage in payment orders and transfer
of funds
- engage in any business other than
providing financial products and services to its members and other
activities prescribed by the BOT
The BOT has the power to extend the prohibited activities.
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Regulations 6 and 18: Application for licence and appointment
of Tanzanians
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A Tanzanian citizen applying for a licence to carry out
microfinance business under Tier 2 must apply to the BoT in the
form set out in the First Schedule to the Regulations and
accompanied with:
- in the case of a company; a
non-refundable application fee of TZS 500,000 (approx. USD
217)
- in the case of an individual money
lender; an application fee of TZS 300,000 (approx. USD 130)
- documents listed in the Second
Schedule to the Regulations, including:
- an application letter
- evidence of payment of the
application fee
- proof of source and availability of
non-borrowed capital
- certified academic and professional
certificates of Board members and the Chief Executive Officer
(CEO)
- certified copy of the Taxpayer
Identification Number certificate and tax clearance
certificate
- Proof of citizenship of every
subscriber, proposed director, CEO and individual money lender
- a declaration that the funds are
clean
- any additional information the BoT
may require
All Tier 2 microfinance service providers must appoint at least
two Tanzanians to the Board of Directors.
An applicant that is a foreign owned microfinance service
provider shall in addition to submitting the documents listed above
also attach:
- an equivalent of the BoT's
approval
- a training plan on how it will impart
microfinance skills and expertise to Tanzanian staff
- a succession plan containing the
extent to which Tanzanian staff shall occupy senior management
positions
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Regulations 9, 12, 24, 35, 46 and 59: Other requirements
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A Tier 2 microfinance service provider:
- shall have a place of business in
Tanzania
- who was in operation before the
commencement of the Act, must within 12 months of the coming into
operation of the Act cease its operations;
- must commence business on 1 January
and end on 31 December of each year
- must with the borrowers' consent
and on a monthly basis, report all borrowers' credit facilities
information to Credit Reference Bureaux
- must within 30 days of failing to
meet the minimum capital requirements submit to the BoT a capital
restoration plan
- who is a sole proprietor and whose
loan portfolio exceeds TZS 200 Million (approx. USD 87,000) shall
be required to form a company and operate as an entity
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Regulations 9, 20 and 33: Approvals from the BoT
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The following instances require the BoT's approval:
- opening, relocating or closing a
place of business
- employing or renewing an employment
contract of a non-Tanzanian
- employing more than five
non-Tanzanians
- changing an external auditor(s)
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Regulations 11 and 13: Determination of application and
licence
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- Upon fulfilment of the requirements
contained in regulation 6, the BOT will within two months issue a
licence
- The licence will be in force unless
suspended or revoked by the BoT (it would appear that there is no
renewal requirement)
- A licence shall expire if the
business does not commence operations within six months of the
grant of the licence
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Regulations 60, 14, 13 and 16: BoT's mandate
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The BoT has powers to:
- in accordance with the provisions of
the Act, revoke or suspend a licence
- refuse in writing to issue a licence
if upon request the microfinance service provider:
- fails to submit any missing or
additional information or documents
- fails to rectify or amend anomalies
in the application
- provides false or misleading
information
- after the expiry of six months of the
grant of a licence, give a microfinance business more time to
commence its operations.
An applicant whose application is refused may reapply upon
rectifying the deficiencies that formed the basis of BoT's
refusal.
In addition to the powers identified above, the BoT can:
- direct a Tier 2 microfinance service
provider to transform to a Tier 1 business
- further to the administrative
measures provided by the Act, take additional administrative
measures against a Tier 2 microfinance business that fails to meet
its capital requirements, including:
- prohibit it from declaring or paying
dividends
- prohibit it from opening a new
branch
- suspend its lending or investment
activities
- give a formal warning
- suspend from office or disqualify the
defaulting director, employee or proprietor
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Regulations 15 and 16: Transformation to Tier 1 and
Transformation from another tier to Tier 2
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A Tier 2 microfinance service provider may upon application and
having fulfilled the criteria provided by the Banking and Financial
Institutions (Microfinance Activities) Regulations of 2014 move to
become a Tier 1 business.
A microfinance service provider under Tier 3 and 4 that intends
to carry out Tier 2 business must:
- meet the requirements of regulation
6
- seek the Board and members approval
or resolution
- meet the minimum capital requirement
provided under regulation 46
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Regulation 61: Appeals
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- A person aggrieved by the decision of
the BOT, must within 21 days from the date of the decision of the
BoT, appeal to the Minister for Finance
- All appeals under the Regulations
shall be governed by the provisions of the Microfinance (Roles of
the Minister) Regulations of 2019
- The right to seek further recourse is
provided under regulation 23 (7) of the Microfinance (Roles of the
Minister) Regulations of 2019, where if a person is aggrieved by
the decision of the Minister for Finance, s/he may appeal to the
High Court
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