Speaking recently at the just-ended seminar for editors on MFIs’ laws, policies and regulations in Morogoro, Commissioner of financial sector development in the ministry of Finance and Planning, Dr Charles Mwamwaja said that the new regulations on MFIs are meant to ensure the protection of clients and the stability of institutions as well as enhancing financial inclusion.
It also cover MFIs establishment, operations, regulation, and supervision in a move to help resolve the challenges facing the microfinance industry, he said.
The new initiatives according to Dr Mwamwaja are also geared towards ensuring that information and loans offered by those MFIs are properly documented as well as addressing unfair practices for debt repayment collections from poor Tanzanians.
“These regulations also give relief to MFIs borrowers from exorbitant loan interest rates,” he said.
"So it high time for MFIs service providers to make sure they obtain a formal license and being registered from the responsible authorities before October 31, this year.”
Acting Commissioner of MFIs, Ministry of Finance and Planning, Dionisia Mjema, said that 80 percent of Tanzanians have been using MFIs services in the country.
“But, since the country’s independence the sector was unregulated, putting Tanzanians at risk and some of them plunged into poverty rather than growing. So, the establishment of these regulations is a remedy and I am sure the initiative will take Tanzania further in terms of socio-economic development,” she said.
She cited the Development Entrepreneurship Community Initiative (Deci), pyramid scheme which emerged in 2009 attracting approximately 700,000 as one of examples.
Mjema said that the journey towards having regulations started more than ten years ago—it involved a number of studies on MFIs as well as identifying, managing, coordinating, developing and empowering them so that they help to relieve people from poverty trap.
After working on challenges facing MFIs that was thwarting growth of the sector, that’s why we came up with these regulations, whose process started in 2012 and completed in 2018 and started operating last year, she said.
For his part, Head of Agriculture and Rural Finance at the Financial Sector Deepening Trust (FSDT) Mwombeki Baregu said that in the new arrangement, MFIs are categorized in four tiers--deposit taking MFIs, non-deposit taking MFIs such as individual money lenders, Savings and Credit Cooperative Societies (SACCOS) and community microfinance groups including Village Community Banking (VICOBA) and Village Savings and Loan Association (VSLA).