BoT accepts 70pc of non-deposit taking microfinance applications

THE Bank of Tanzania (BoT) has issued 1,305 licences to class two non-deposit taking microfinance service providers in the last three and half years to June.

The central bank’s move centred on regulating the subsector while safeguarding the market from elevated loaning rates for non-deposit-taking finance companies that are non-bank lending institutions, which do not issue a prospectus or take deposits from the public.

BoT’s Directorate of Financial Sector Supervision, Principal Bank Officer, Ms Mwile Kauzeni, said 1,861 applications were received by the end of the first week of this month, though some were rejected as they failed to meet the set criteria.

“Many customers are in big cities. Rukwa has the smallest number followed by Katavi with nine,” said Ms Kauzeni over the weekend.

The licensing tier two also centred on the complaints from society that some of the service providers are defrauding customers on one hand while on the other some borrowers are not repaying the loans.

She said Dar es Salaam tops the list with 373 tier two microfinance service providers, while Rukwa is at the bottom with merely seven financial service points.

The second region was Mwanza with 118 and Arusha 77, while Mbeya and Dodoma tied at 71 and Mara with 54 centres.

Microfinance refers to the provision of financial services to low-income individuals who are traditionally not served by conventional financial institutions.

“The applicant (tier two microfinance service providers—individual money lenders) to commence operations with and maintain at all times a minimum capital of 20m/-,” according to BoT website.

The Microfinance (Non-Deposit Taking Microfinance Service

Providers) Regulations, 2019 categorise the service providers into four tiers where tier one, comprising deposit-taking microfinance service institutions and tier two, comprising non-deposit taking microfinance service providers such as individual money lenders.

Other providers are tier three, comprising Savings and Credit Cooperative Organisations (Saccos); and, tier four, comprising community microfinance groups.

The BoT is supervising microfinance under class one and two while Saccos by the Tanzania Cooperative Development Commission (TCDC) and Vicoba to be under President’s Office, Regional Administration and Local Government Tanzania (PO-RALG).

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