Microfinance lenders given one year to align processes
Dar es Salaam. Borrowers from microfinance institutions are now expected to get a relief from overpriced loan interest rates following government’s directive to the institutions to align their financial process systems with newly approved microfinance regulations.
Bank of Tanzania (BoT)’s manager responsible for supervision of microfinance institutions Mr Victor Tarimo said the new regulations are published on the Central Bank’s website after the minister for Finance and Planning approved them on November 1, 2019.
“Following the approval, microfinance institutions were given a one-year grace period to align their financial processes with the regulations,” he said.
He said, the Bank will call a meeting with the microfinance institutions to update them on lending methodology and pricings.
Finance and Planning, Dr Philip Mpango has in several occasions accused microfinance institutions of promoting unfair practices for debt repayment collections from poor citizens.
He urged BoT to intensify efforts in monitoring the conduct of all institution providing financial services to low income population in the country and take strict legal action when they are found to breach the law.
Delivering a speech on the country’s economic landscape in Dodoma on Tuesday, Dr Mpango expressed dissatisfaction on how the public was being manipulated by the institutions especially the low economic earners who are forced to pay as high as 36 to 240 percent interest rates on an annual basis.
Dr Mpango said the major challenge was lack of transparency in the loan terms as well as lack of coordination in the disbursement of the loans which accumulate debt to their clients.
According to the minister, microfinance institutions fail to issue dividends or benefits to their members or clients.
He said the institutions provide inappropriate debt collection that leads to confiscation of citizen properties while at the same time creating loopholes for money laundering.
He said the government aims to provide citizens with a common understanding of the Policy (2017) and the key elements set out in the Minimum Financial Services Act (2018) including the mandate of BoT to regulate the microfinance, provisions for protecting consumers of small services.
Financial instruments, procedures for managing the issuance of interest and dividends on stocks, savings and deposits collected by microfinance institutions, and penalties for violating the conditions imposed.
