Tanzania: ‘Regulate microfinance subsector’

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Mar 2014
Tanzania, March, 11 2014 - Stakeholders are calling for the establishment of a new law to govern the rapidly growing microfinance subsector in the country which in principle is the main provider of financial services to rural areas and even some parts of various urban centers and therefore, a proper regulatory regime is necessary.

Expressing their professional views on the subject at a recent meeting of the Tanzania Association of Microfinance Institutions (TAMFI) in Dar es Salaam, members said the subsector needs an improved regulatory environment if the government is to maximise the subsector’s potential.

The meeting observed that a major impediment to the development of microfinance in Tanzania is lack of legislation to guide operations of the sub-sector.

They maintained that, with over 70 percent of Tanzanians still not using banks, microfinance institutions (MFIs) play a vital role in increasing access to finance which, in turn, necessitates a proper regulatory environment guided by a Microfinance Act.

“The law should also include establishment of a microfinance credit reference bureau,” said Lucy Sondo a legal consultant.

Altemius Milinga, a TAMFI Board member, said that over the years MFIs have gone through a lot of challenges rooted in the lack of a clear regulatory framework tailored to meet the needs of the subsector.

“Absence of the microfinance law has to a large extent contributed to poor performance and diversity in institutional form, limited outreach, unhealthy competition, limited access to funds among many challenges,” Milinga explained.

He explained that TAMFI is advocating for the introduction of a microfinance law that is business friendly, inclusive and allows fair competition in the operation of financial services.

“Without a proper regulatory base, an MFI cannot be sure of how long it is going to last… this is why it is hard for many MFIs to attract big investment capital,” he went on to explain.

“Despite many gains, the sector can do much better if it is clearly regulated to enable it improve it outreach and sustainability,” he said.

“We want a law that will provide legal guidelines and ensure that the interests of all microfinance institutions are catered for to enable them provide better services to more people and in much more efficiently,”

The members held that the desired law must center on the fact that, the primary objective of establishing microfinance institutions is to increase financial access to the poor and so the law must facilitate a conducive environment for the goal to be achieved and sustained.



 

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