Government explains merits as it pushes Microfinance Bill

Dodoma. The government has continued to push the Microfinance Bill, 2018, which was read for the second time and debated in parliament yesterday.

Among other things, the proposed Act seeks to save borrowers from exorbitant interest rates currently charged by loan sharks, ease loans repayment terms, and curb money laundering in Tanzania’s financial system.

Finance and Planning Minister Philip Mpango told Parliament in Dodoma yesterday that the lack of procedures to protect microfinance institutions consumers remains among the major challenges in the (microfinance) sub-sector.

However, government has agreed to revisit the previous version of the Microfinance Bill, 2018 with a view to protecting the interests of product and service providers as well.

The decision came hot on the heels of proposals by the Parliamentary Budget Committee to the government to amend some sections not friendly to the microfinance business.

Some conditions that should be softened include the need for qualified, registered auditors, and recognition of the Finance minister as the only authority to whom microfinance operators could appeal in case their licences were revoked.

However, microfinance operators would still be able to appeal to the court in case they were dissatisfied with a government decision to revoke their licence.

“The first version (of the Bill) would be painful to microfinance players. They are not that strong financially to employ qualified and registered auditors,” said Budget Committee chairman George Simbachawene.

The chairman cautioned the government to ensure that the issuance of licences does not affect the operations of microfinance businesses.

During the discussions in Parliament, a section of lawmakers punched holes in the Microfinance Bill, 2018, saying it would paralyse the microfinance sub-sector, and deny Tanzanians the right to form self-help groups which may not be commercially oriented.

Nzega MP (CCM) Hussein Bashe noted that microfinance businesses like Saccos schemes should not be included when it comes to penalties.

“If we want to increase financial inclusion, the government should create a friendly environment for microfinance businesses,” suggested Mr Bashe.

The Bill proposes penalties of up to Sh100 million, or imprisonment of up to five years, for lenders carrying out any microfinance business without being licensed.

The outspoken lawmaker also criticised the proposed Bill for not touching on Zanzibar. This is despite finance being a Union matter in terms of the Union Constitution.

Mr Bashe also called for harmonisation of related laws to avoid any problems that are likely to happen in the future.

Special Seats MP (Chadema) Upendo Peneza played down claims that lack of effective regulatory frameworks for the microfinance business could plunge the country into rampant money laundering.

Non-parliamentarian stakeholders in the microfinance sub-sector have also criticised the proposed law, saying it would hamper financial inclusion, especially for community groups which are not commercial in nature, but which nonetheless benefit Tanzanians.

In that regard, they suggested that the Bill should target only microfinance business firms and similar commercial entities. Otherwise, the proposed law could discourage millions of Tanzanians from forming income-generating, community-based groups.