A farmer weeds her farm. More than 70 per cent of rural people are unbanked. PHOTO|FILE
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On the other hand Tamfi Board member Altemius Milinga said that Tamfi will soon present a proposal to the government on the need to introduce such a law and what the MFIs want included.
Dar es Salaam. The microfinance sector is largely unregulated even as data shows that a good number of Tanzania’s rural population depends on such services for their financial needs.
Industry players say there is an urgent need to establish a new law that governs the rapidly growing and increasingly vital microfinance subsector in Tanzania.
Tanzania Association of Microfinance Institutions (Tamfi) said last week in Dar es Salaam that the major impediment to the development of microfinance business in Tanzania is lack of specific legislation to guide operations of the sub-sector.
“A proper regulatory regime is necessary for the industry’s growth,” said Tamfi Board Chairman Edmund Mkwawa, during Tamfi members meeting.
With over 70 per cent of Tanzanians still unbanked, microfinance institutions (MFIs) play a pivotal role in increasing access to finance, which necessitates a proper regulatory environment guided by a Microfinance Act. According to Mr Mkwawa, over the years MFIs have gone through a lot of challenges because of lack of a clear regulatory framework tailored to meet the needs of the subsector.
“Lack of a microfinance law has contributed to a large extent to the poor performance, diversity in institutional form, limited outreach, unhealthy competition, limited access to funds, among many other challenges,” said Mr Mkwawa.
Tamfi members resolved to up dialogue with the government to ensure that a law is crafted in line with microfinance policy which came into being 14 years ago. “We are advocating for introduction of a Microfinance Law that is business friendly, inclusive and allows fair competition in financial service operations,” he said adding that “We need to have our legal existence as microfinance industry clearly known.”
On the other hand Tamfi Board member Altemius Milinga said that Tamfi will soon present a proposal to the government on the need to introduce such a law and what the MFIs want included.
“Without proper regulatory base an institution can’t be sure how long it’s going to last… no wonder it is hard for many MFIs to attract big capital. Despite many gains, the sector can do much better if clearly regulated to enable the subsector to improve outreach and sustainability,” said Mr Milinga.
He said that many microfinance SMEs have great capability in reaching people both in urban and rural areas if well enabled.
“We want a law that will provide guidelines and ensure the interests of all microfinance institutions are well covered whether big or small to enable them to provide improved services,” he said.
