Decree No. 2007-013 on the Minimum Capital of Credit Institutions and the Nominal Value of Participation Shares

DECRET No. 2007-013 on the Minimum Capital of Credit Institutions and the Nominal Value of Participation Shares.

THE PRIME MINISTER, HEAD OF GOVERNMENT, Having regard to the Constitution; Having regard to Law No. 95-030 of February 22, 1996, on the activity and supervision of credit institutions, as amended; Having regard to Law No. 2005-016 of September 29, 2005, on the activity and supervision of microfinance institutions; Having regard to Decree No. 2003-007 of January 12, 2003, appointing the Prime Minister as Head of Government; Having regard to Decree No. 2003-008 of January 16, 2003, as amended by Decrees No. 2004-001 of January 5, 2004, No. 2004-680 of July 5, 2004, No. 2004-1076 of December 7, 2004, No. 2005-144 of March 17, 2005, No. 2005-700 of October 19, 2005, No. 2005-827 of November 28, 2005, and No. 2006-738 of October 4, 2006, appointing members of the Government; After opinion of the Banking and Financial Supervision Commission (CSBF), in application of Articles 19, 21, 22, and 45 of Law No. 95-030; On the proposal of the Minister of Economy, Finance, and Budget; In Council of Ministers;

DECREES:

TITLE I: MINIMUM CAPITAL

Article 1 - The implementation procedures of Law No. 95-030 of February 22, 1996, on the activity and supervision of credit institutions, and Law No. 2005-016 of September 29, 2005, on the activity and supervision of microfinance institutions (MFIs), are established by this Decree regarding the minimum capital.

Article 2 - Credit institutions with their registered office within the territory of the Republic of Madagascar must possess, upon incorporation, a paid-up share capital and/or endowment of at least: • Three billion ariary (MGA 3,000) for territorial banks; • Three billion ariary (MGA 3,000) for extra-territorial banks; • Three billion ariary (MGA 3,000) for specialized financial institutions; • One billion ariary (MGA 1,000) for financial establishments. For MFIs, this amount varies according to their classification.

Article 3 - Without prejudice to compliance with general corporate law requirements, no paid-up minimum capital is required for Level 1 microfinance institutions (MFI 1), whether mutual or non-mutual.

Article 4 - • Networked mutual Level 2 microfinance institutions (MFI 2) must possess a paid-up minimum share capital of: o fifteen million ariary (MGA 15,000,000) for a basic mutual MFI; o sixty million ariary (MGA 60,000,000) for an Association; o one hundred million ariary (MGA 100,000,000) for a Federation. • Non-networked mutual MFI 2 must possess a paid-up minimum share capital of fifteen million ariary (MGA 15,000,000). • Non-mutual MFI 2 not authorized to receive public deposits, established as a Limited Liability Company (LLC) with multiple partners, must possess a paid-up minimum share capital of sixty million ariary (MGA 60,000,000). • Non-mutual MFI 2 not authorized to receive public deposits, established as a Joint Stock Company (JSC) with fixed capital and multiple shareholders, must possess a paid-up minimum share capital of one hundred million ariary (MGA 100,000,000). • Non-mutual MFI 2 authorized to receive public deposits must possess a paid-up minimum share capital of two hundred million ariary (MGA 200,000,000).

Article 5 - Networked mutual Level 3 microfinance institutions (MFI 3) must possess a paid-up minimum share capital of: • three hundred million ariary (MGA 300,000,000) for a basic mutual MFI; • five hundred million ariary (MGA 500,000,000) for an Association; • one billion ariary (MGA 1,000) for a Federation. Non-networked mutual MFI 3 must possess a paid-up minimum share capital of three hundred million ariary (MGA 300,000,000). Non-mutual MFI 3 must possess a paid-up minimum share capital of seven hundred million ariary (MGA 700,000,000).

Article 6 - The participation of an MFI in an Association or a Federation must not reduce its Core Own Funds, as defined by the Banking and Financial Supervision Commission (CSBF), below the required minimum capital.

Article 7 - The Banking and Financial Supervision Commission (CSBF) is authorized to require, for the granting of a license or approval, a paid-up share capital higher than the minimum set in Articles 2, 3, 4, and 5 above, up to the amount necessary for compliance with prudential and management rules applicable to each category of Institution based on successive forward-looking financial statements presented in the business plan.

TITLE II: NOMINAL VALUE OF SHARES

Article 8 - The minimum nominal value of a share or stock, depending on the legal form, is set at twenty thousand ariary (MGA 20,000) for territorial and extra-territorial banks, specialized financial institutions, and financial establishments. The minimum nominal value of a share or stock of a Microfinance Institution, depending on the legal form, is set at: o five thousand ariary (MGA 5,000) for MFI 2 Cooperative Companies; o twenty thousand ariary (MGA 20,000) for MFI 3 Cooperative Companies; o twenty thousand ariary (MGA 20,000) for Limited Liability Companies (LLC) with multiple partners and Joint Stock Companies (JSC) with multiple shareholders. In case of amendments to existing regulations, the general legal rules pertaining to the legal form remain applicable. Equity instruments issued by a microfinance institution must have the same nominal value fixed in their statutes. The form of equity instruments for credit institutions must allow the identification at all times of shareholders or members holding these instruments. The principle of equality of rights and obligations among members governs mutualism. For basic mutual MFIs, a member is entitled to one vote regardless of the number of their shares.

TITLE III: GENERAL AND TRANSITIONAL PROVISIONS

Article 9 - In application of Article 22 of Law No. 95-030 of February 22, 1996, these credit institutions must be able to demonstrate that their assets always exceed by at least an amount equal to the minimum capital, the liabilities owed to third parties. The institutions referred to in Articles 2, 3, 4, and 5 above that are operational on the date of publication of this Decree in the Official Journal of the Republic have a period of two (2) years from that date to comply with these provisions, through the effective increase of their paid-up share capital. As an exception, the Banking and Financial Supervision Commission (CSBF) may grant a credit institution an additional period to regularize its situation, provided that this new extension does not exceed six (6) months. Approved credit institutions that have not opened their counters on the date of publication of this Decree in the Official Journal of the Republic are required to comply with the provisions of this Decree prior to commencing operations.

Article 10 - All contrary prior provisions are hereby repealed, including those of Decree No. 98-085 of January 27, 1998, and Article 2 of Decree No. 98-127 of February 5, 1998.

Article 11 - The Minister of Economy, Finance, and Budget and the Governor of the Central Bank are each responsible, within their respective areas, for implementing this Decree, which shall be published in the Official Journal. Done at Antananarivo, on January 9, 2007 By the Prime Minister, Head of Government, Jacques SYLLA The Minister of Economy, Finance, and Budget, Benjamin Andriamparany RADAVIDSON