Following our updater on the Microfinance Act 2018 (the Act), this month's legal briefing focuses on the Microfinance (Role of the Minister) Regulations, Government Notice No. 575 of 2019 (the Regulations). The Regulations have been made under section 15(4) of the Act and were made public on 2 August 2019. The Regulations will come into operation via a commencement notice that will be published in the Gazette by the Minister of Finance (the Minister).

The Regulations will give the Minister power to enhance, ensure and promote a sustainable microfinance business environment and implement microfinance policies, transparency and accountability. When the Regulations come into operation, they will mainly affect Microfinance Service Providers (MFIs), promoters and stakeholders.

Key definitions in the Regulations

Focal Person refers to a person responsible for coordinating all matters relating to microfinance business within his area of designation. Among other things, the Focal Person will be responsible for developing and managing the microfinance database in his locality; promoting microfinance business in the country; monitoring and evaluating the progress of microfinance business; conducting registration of, and issuing permits to, Promoters; and registering and deregistering Promoters.

Forum refers to the Microfinance Stakeholders Forum whose function is to deliberate on issues of common interest for the purpose of coordination and promotion of the microfinance subsector. The Forum will be composed of representatives from the Ministry for Finance, the Bank of Tanzania (BoT), delegated authority, MFIs, microfinance industry associations, business development service providers, development partners, Promoters and relevant Stakeholders.

Promoter is an individual or an entity registered under the Regulations whose function is to promote microfinance business.

Stakeholder is an individual or entity that is directly or indirectly engaged in activities relating to microfinance business and includes MFIs, consumers, Promoters and government institutions.

Key legislative highlights in the Regulations

No. relevant provision overview

Application (regulation 2 of the Regulations)

The Regulations will apply to microfinance businesses undertaken under Tier 2 (comprised of non-deposit taking MFIs such as individual money lenders), Tier 3 (comprised of Savings and Credit Cooperative Societies) and Tier 4 (comprised of community microfinance groups).

Promotion of microfinance business (regulation 14 of the Regulations)

The promotion of microfinance business must be conducted by Promoters who are registered under the Regulations. Such promotion must include any activity undertaken by the Promoter intended to:

  • facilitate the formation or operation of MFIs;
  • provide training and financial education to MFIs, consumers or other Stakeholders; and
  • provide support to MFIs to efficiently undertake microfinance business.
The Minister will also be responsible for creating an enabling environment for Promoters by encouraging: research and development in the microfinance subsector; innovation; and linkage of community microfinance groups with formal financial system.

Registration of Promoters and certificate of registration (regulations 15 and 16 of the Regulations)

A person must not conduct promotion of microfinance business without being registered as a Promoter.

To become a Promoter one must register with a local government authority using the form prescribed in the Second Schedule to the Regulations. The form must be accompanied by:

  • a letter of introduction or approval from a relevant authority;
  • a non-refundable fee of not more than TZS 50,000 (approx. USD 22);
  • a certificate of registration or incorporation from a relevant authority; and

any other additional information/document as may be required by the local government authority.

A Promoter's certificate of registration is valid for two years and may be renewed.

Rejection of application (regulation 17 of the Regulations)

An application to become a Promoter may be rejected by the local government authority if it is not satisfied with the contents therein. Upon rejection of the application, the applicant will be notified accordingly.

An applicant whose application has been rejected may reapply after addressing and correcting any deficiencies that formed the basis for rejection of the initial application.

Register of Promoters (regulation 18 of the Regulations)

Every local government authority must keep and maintain a register of all microfinance business Promoters. The register will contain the following information:

  • particulars of the Promoter including name and address;
  • legal status of the Promoter;
  • nature of the promotion service;
  • area of operation; and
  • any other information as may be required for the purpose of registration.
The register will be accessible to the public for a fee of TZS 5,000 (approx. USD 2).

Deregistration of Promoters (regulation 19 of the Regulations)

A Promoter can be deregistered from the register of Promoters if the local government authority is satisfied that the following circumstances have occurred:

  • the Promoter has failed to comply with the terms and conditions of registration;
  • the Promoter has failed to comply with the guidelines;
  • the certificate of registration or incorporation has been revoked by the relevant authority;
  • the Promoter has been convicted of an offence relating to microfinance business; or
  • the Promoter engages in misconduct that has the effect of damaging the integrity and sustainability of microfinance business.
A notice of 30 days will be given to the defaulting Promoters to show cause as to why they should not be deregistered.

Permit of Promoters (regulation 20 of the Regulations)

Promoters will only be permitted to conduct promotion business within the local government authority where they were registered. A move to another area shall require a permit from the Focal Person and, among other things, a non-refundable fee of TZS 10,000 (approx. USD 4).

Handling of consumer complaints (regulation 25 of the Regulations)

Pursuant to what has been provided in the Act, the BoT or delegated authority must ensure that every MFI formulates a mechanism for handling consumer complaints. Should a consumer be aggrieved with a decision of the MFI the complaint will be referred to the BoT or delegated authority. The Minister will only be brought in when the consumer complaint involves policy issues which require his intervention.

Offences and penalties (regulation 26 of the Regulations)

Any person who contravenes the provisions of the Regulations where no penalty has been specified commits an offence and shall, upon conviction, be liable to the penalty provided in the Act. Pursuant to section 52 of the Act the penalty is: a fine of up to TZS 20 million (approx. USD 9,000); imprisonment of up to five years; or both the fine and imprisonment, depending on the category of the MFIs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.