POLICY AND REGULATIONS FOR MICROFINANCE Mtchaisi Chintengo Reserve Bank of Malawi at Legal and...
-
Upload
amia-applebee -
Category
Documents
-
view
215 -
download
0
Transcript of POLICY AND REGULATIONS FOR MICROFINANCE Mtchaisi Chintengo Reserve Bank of Malawi at Legal and...
POLICY AND REGULATIONS POLICY AND REGULATIONS FOR MICROFINANCEFOR MICROFINANCE
Mtchaisi ChintengoMtchaisi ChintengoReserve Bank of Malawi Reserve Bank of Malawi
atat Legal and Regulatory Workshop Legal and Regulatory Workshop
Outline Outline
Highlights of Microfinance ActMicrocredit Agencies:
Licensing and entry requirements Reporting requirements
Non-Deposit MFIs Licensing and entry requirements Reporting requirements
Compliance and EnforcementExit Administration
Highlights of Microfinance Highlights of Microfinance ActActThe following are exempt from
the provisions of the Act (S4) SACCOs Small member based institutions Those below threshold to be
determined by the Registrar
Highlights continued ……Highlights continued ……
Microfinance Service Providers have to be (5): Registered as a microcredit agency; or Licensed as a non-deposit taking MFI; or Licensed as a deposit taking MFI; or Approved licensed financial institution.
Microfinance Service Providers shall not engage in any other business other than the business specified on certificate/licence (s8)
Highlights continued ……Highlights continued ……
Microfinance Service Providers shall conduct business at place specified on licence/certificate (s9)
Change/ closing of place of business requires giving prior notice to Registrar
A Microfinance Service Providers whose licence/certificate/approval is suspended or revoked shall not continue top conduct any microfinance business (s12)
Highlights continued ……Highlights continued ……
A microfinance institution has as its primary funtion the provision of microfinance services i.e. no more than
MCAs DirectiveMCAs Directive
Rationale – establish requirements for registration; supervision; and minimum market conduct
Objectives:To register MCAsTo ensure adherence to high standards
of market conduct
MCAs Registration MCAs Registration Requirements Requirements
Legal status – not restrictedApplication – Schedule 1Viable business planClean CVs for chief executive/directorsResolution of parent company – foreign
owned onlyBy-laws reflecting corporate governance
– how to appoint directors/senior management
Application fees of K50,000 – non-refundable
Supervision of MCAs Supervision of MCAs
Reporting: Biannual reports (Schedule II) –
qualitative/financial reports within 6 weeks after half year
Audited (by certified auditor) annual accounts – 4 months after end of year
MCAs to apply for licence as non-deposit taking upon attaining: Assets worth K100.0 millionAnnual turnover of K300.0 million
Other Directives may be introduced
Non-Deposit Taking Non-Deposit Taking DirectiveDirectiveRationale – establish
requirements for licensing; supervision; and minimum market conduct standards
Objectives:To license all NDTIsTo ensure adhere to high standards
of market conduct and corporate governance
NDTIs Licensing NDTIs Licensing Requirements Requirements Legal status – restricted to
companies (guarantee or shares) Capital or guarantee of K75.0 million Application supported by:
• Business plan - scope of operations, description and rationale of services and capacity;
• Projected balance sheet and income statement for 3 years stating assumptions basing on feasibility analysis;
• Written risk management systems; and• Name and address of applicant’s auditors.
NDTIs Application SupportNDTIs Application Support
Clean CVs for CEO, directors, as well as shareholders information;
In case of foreign-owned: Consent letter from shareholders’ home
supervisory authority allowing applicant to invest in Malawi; and
Resolution of the applicant approving establishment of subsidiary in Malawi
A memorandum of association and articles of association or byelaws – focusing corporate governance; and
Non-refundable application fee of K100,000
NDTIs SupervisionNDTIs Supervision
Reporting:Quarterly reports of operations (Schedule II) - not
later than 6 weeks after the end of each quarter; and
audited annual accounts – 4 months after year end
Prudential supervision:Asset base of K500 million; orAnnual revenues in excess of K600 million
To comply with directives for prudentially-regulated MFIs !!!
NDTIs Compliance MattersNDTIs Compliance Matters
Minimum governance standards: Management comprising a CEO and at least 1
other senior officer, e.g. chief financial officer or head of operation; and
Minimum qualification of diploma in relevant fields plus at least 3 years experience in financial sector
An NDTI to:Establish internal audit unit or committee; and Appoint external auditor
Other directives to be introduced as we go
Cross-Cutting Compliances: Cross-Cutting Compliances: MCAs and NDTIsMCAs and NDTIsInspection of books of account and
recordsReporting to credit reference bureausAccessing credit report to ascertain
credit status of loan applicantsReporting suspicious transactions to FIUMaintaining confidentiality of dealings
and relation with clientsExceptional disclosure granted when
required by law, court order or Registrar
More Cross-Cutting More Cross-Cutting CompliancesCompliances
Transparent pricing:Disclosures – prices, other charges, insurance
premiums, loan processing fees, etc.Collateral requirements – savings, assets
Take-home pay requirement as per Employment Act
Interest calculation basing on reducing balance method – straight line method outlawed!!
Partial or total loan prepayment allowed – penalties, if any, to be described in contract
Compulsory savings allowed - but not for intermediation!!!
More Cross-cutting More Cross-cutting CompliancesCompliances
Display registration certificate/licence, interest rates/other charges, rights and obligations, etc.
Penalties for offences, e.g. late submission of returns, other non-compliances
Complaints resolution Complaint receiving channel – designate staff Complaint resolution – designate staff or committee
to investigate and resolve issues with clients Open register of complaints and resolutions Report to Registrar resolved/unresolved complaints Advise clients to report unresolved complaints to
Registrar
Challenges of MFI Challenges of MFI SupervisionSupervision
Human capacity – skills, knowledge, etc.
Management information systemsOperational infrastructure, e.g.
computers, network, electricity, etc.High default, high operating expensesCompliance – governance,
prudential, etcFear of the Invisible Hand - Registrar
Other Thoughts to Reflect Other Thoughts to Reflect onon
Possible membership of money-lending institutions – institutionalization and enhancement of best practices in industry
Industry imageResource mobilization – financial
strengthening of NetworkDownscaling of banks – threat or
complementary??