Microfinance Regulations (Social Microfinance Groups) of 2019

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Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 1 UNITED REPUBLIC OF TANZANIA MICROFINANCE REGULATIONS (SOCIAL MICROFINANCE GROUPS) OF 2019 [SUBORDINATE LEGISLATION] This edition of the Microfinance Regulations (Social Microfinance Groups) of 2019 is an Official Translation certified by the Attorney General's Office pursuant to Section 84 of the Interpretation and General Provisions Act, Cap. 1. Dodoma, ADELARDUS L. KILANGI ………………., 2020 Attorney General

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 2 GOVERNMENT NOTICE No. 678 Published 13/9/2019 MICROFINANCE ACT (CAP. 407)

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REGULATIONS

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(Made under Section 60(1) and (2))

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MICROFINANCE REGULATIONS (SOCIAL MICROFINANCE GROUPS), 2019 Title PART ONE: PRELIMINARY PROVISIONS

1. Title.
2. Application.
3. Interpretation. Establishment of Social Microfinance Group PART TWO: ESTABLISHMENT OF SOCIAL MICROFINANCE GROUP
4. Establishment of a social microfinance group.
5. Preliminary meeting.
6. Interim committee and its functions.
7. Inaugural meeting and its functions. Registration of Social Microfinance Group PART THREE: REGISTRATION OF SOCIAL MICROFINANCE GROUP
8. Registration application.
9. Name of the social microfinance group.
10. Decisions on registration applications.
11. Certificate of registration.

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 3 12. First sitting. 13. Refusal of registration. 14. Re-application for registration. 15. Appeal against refusal of registration. 16. Register of social microfinance groups. 17. Cancellation of registration. Operation PART FOUR: OPERATION 18. Commencement of operational activities. 19. Permitted and prohibited activities. 20. Operational conditions. 21. Submission of reports. 22. Governance of the social microfinance group. 23. Consumer protection. 24. Collaboration with other institutions. Internal Monitoring and Control PART FIVE: INTERNAL MONITORING AND CONTROL 25. Monitoring. 26. Appointment of internal controller. General Conditions PART SIX: GENERAL CONDITIONS 27. Credit information exchange. 28. Engagement of a facilitator. 29. Transitional period. 30. Graduation of a social microfinance group. 31. General penalties. 32. Administrative measures.

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SCHEDULES

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Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 4 GOVERNMENT NOTICE No. 678 Published 13/9/2019 MICROFINANCE ACT (CAP. 407),

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REGULATIONS

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(Made under Section 60(1) and (2))

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MICROFINANCE REGULATIONS (SOCIAL MICROFINANCE GROUPS), 2019 PART ONE: PRELIMINARY PROVISIONS Title 1. These Regulations shall be known as the Microfinance Regulations (Social Microfinance Groups) of 2019. Application 2. These Regulations shall apply to registered microfinance service providers operating in Level 4 under the Act. Interpretation 3. In these Regulations, unless the context otherwise requires: "Account" means a bank account or electronic money account; "Act" means the Microfinance Act; "approved officer" means a person appointed to that position by the Local Government Authority; "Bank" means as defined under the Bank of Tanzania Act; "social microfinance group" means as defined in the Act; "constitution" means the written agreements passed by a social microfinance group under these Regulations;

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 5 Cap. 287 and 288 passed by a social microfinance group under these Regulations; "credit information exchange institution" means an institution specifically collecting and selling credit information for individuals and institutions; "Delegated Authority" means the Local Government Authority delegated by the Bank to perform functions and exercise powers of the Bank regarding social microfinance groups under the Act; "housing microloan" means a secured or unsecured loan provided to households in rural or urban areas for building, repairing, or improving housing; "founding members" means members who participated in establishing the group; "Local Government Authority" means as defined under the Local Government (District Authority) Act and the Local Government (Urban Authorities) Act; "member" means a person who is a member according to the constitution of a registered social microfinance group; "microfinance service provider" means as defined in the Act; "Minister" means the Minister responsible for financial matters; "facilitator" means an individual or registered institution licensed to promote and enable microfinance business, including the establishment, registration, and operation of a social microfinance group; "contributions" means collections of funds accepted by group members to obtain group capital; "Level 4" means a type of microfinance service provider that includes a social microfinance group.

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 6 PART TWO: ESTABLISHMENT OF SOCIAL MICROFINANCE GROUP Establishment of a social microfinance group 4.-(1) A social microfinance group may be established by individuals united for the purpose of operating a microfinance business in accordance with the conditions of the Act and these Regulations. (2) Without affecting sub-regulation (1), a social microfinance group may be established by a number of ten to fifty persons with aligned objectives for the group's activities. Preliminary meeting 5.-(1) Persons intending to establish a social microfinance group shall convene a preliminary meeting for the purposes of: (a) discussing and agreeing on the establishment, objectives, and constitution of the group; and (b) electing an interim committee to facilitate the establishment of the group. (2) Attendees of the preliminary meeting shall be considered founding members of the prospective social microfinance group. Interim committee and its functions 6.-(1) The interim committee elected under regulation 5 shall consist of a number of members as determined at the preliminary meeting. (2) The functions of the interim committee shall be: (a) proposing the name and objectives of the group being established; (b) preparing a draft constitution which, at minimum, shall include matters specified in the First Schedule of these Regulations; (c) listing the names of founding members and taking minutes of the preliminary meeting;

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 7 (d) proposing the group's structure; (e) preparing or obtaining all necessary documents to meet registration requirements; (f) convening the inaugural meeting of the group; and (g) holding the first sitting after the group's registration. Inaugural meeting and its functions 7.-(1) There shall be an inaugural meeting of founding members, organized by the interim committee, for the purpose of establishing and registering a social microfinance group. (2) The inaugural meeting held under sub-regulation (1) may be conducted under the leadership of an approved officer or a facilitator and shall have the following functions: (a) approving the proposed name and objectives of the group; (b) agreeing on the group's structure as recommended by the interim committee; (c) proposing names for the group's leaders; (d) discussing and verifying the draft constitution and other documents prepared by the interim committee for the purpose of applying for group registration; and (e) empowering the interim committee to complete necessary documents for registration and submit them to the Bank or Delegated Authority. (3) If founding members or the interim committee involve a facilitator to assist in establishing and registering the group, the facilitator's functions shall include: (a) preparing the constitution and other necessary documents for the establishment and registration of the group; (b) providing training to founding members to enable the establishment and registration process; and (c) performing other tasks as directed by founding members or the interim committee for the purpose of establishing and registering the group. (4) The facilitator's functions for the establishment and registration of the group shall cease once the group's registration is completed, unless required to perform other facilitation activities.

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 8 PART THREE: REGISTRATION OF SOCIAL MICROFINANCE GROUP Registration application 8.-(1) A social microfinance group intending to operate a microfinance business shall submit an application for registration to the Bank or Delegated Authority using Form No. 2 attached in the Second Schedule of these Regulations. (2) Applications made under sub-regulation (1) shall be accompanied by the following: (a) two signed copies of the constitution by all members; (b) two signed copies of minutes from inaugural meetings by all members; (c) resolutions of members to establish and register a social microfinance group, submitted via Form No. 1 as shown in the Second Schedule; (d) proposals for the group's structure and names of proposed leaders by the applicant; (e) a list of members, considering that the number of members meets regulation 4(2); (f) proof of payment of founding members' contributions; (g) an identification letter for the applicant from the ward or village authority; and (h) any other relevant documents or information. Name of the social microfinance group 9.-(1) The proposed name for registration shall be unique and include the words "Social Microfinance Group". (2) Regardless of sub-regulation (1), the name of a social microfinance group shall not include the word "bank". Decisions on registration applications 10.-(1) The Bank or Delegated Authority shall, within fourteen days of receiving complete registration documents, process the application and issue a decision. (2) Where the Bank or Delegated Authority receives incomplete or erroneous documents for registration, it may, before deciding on the application, require the applicant to: (a) submit missing documents or information; or (b) rectify the errors to meet registration requirements. Certificate of registration 11.-(1) The Bank or Delegated Authority, after being satisfied that all requirements are met, shall register the social microfinance group and issue a certificate of registration; (2) If the Bank or Delegated Authority is not satisfied with the fulfillment of application conditions, it shall refuse the registration application. (3) The certificate of registration issued under sub-regulation (1) shall be in Form No. 3 as specified in the Second Schedule of these Regulations.

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 9 (4) A certificate of registration issued under these Regulations shall take effect from the date of issue and remain valid until cancelled by the Bank or Delegated Authority. First sitting 12.-(1) The interim committee shall convene the first sitting within one month of receiving the certificate of registration, for the purposes of: (a) presenting the certificate of registration to group members; (b) confirming proposed leaders or electing group leaders according to the constitution; (c) dissolving the interim committee; and (d) discussing other matters as members deem appropriate or as specified in the constitution. (2) At the first sitting, no regulation shall prevent a member of the interim committee from being elected as a group leader. Refusal of registration 13.-(1) The Bank or Delegated Authority may refuse to register a social microfinance group where the group has failed to: (a) meet the conditions of registration as specified in regulation 8; or (b) submit correct and appropriate information or documents required for registration. (2) If the Bank or Delegated Authority refuses to register a social microfinance group, within seven days from the date of decision, it shall issue a written notice to the group explaining the reasons for refusal. Re-application for registration 14. A social microfinance group whose application was refused under regulation 13 may submit a new application after completing the apparent deficiencies from the initial application or following subsequent reviews that have been rectified or otherwise addressed. Appeal against refusal of registration 15.-(1) A social microfinance group dissatisfied with the decision of the Bank or Delegated Authority under regulation 13 may, within thirty days from receiving written notice: (a) if it is a decision of the Delegated Authority, appeal to the Bank; or (b) if it is a decision of the Bank, appeal to the Minister. (2) An appeal made under sub-regulation (1) shall be in writing and clearly state the following: (a) the substance of the appeal; (b) the grounds for the appeal; and (c) any other relevant matters. (3) The Minister shall decide the appeal in accordance with the Microfinance Act (Minister's Functions), 2019. (4) Considering sub-regulation (1), the Bank or Minister shall decide the appeal within sixty days from receiving the appeal application. (5) In deciding an appeal under sub-regulation (3), the Bank or Minister may require the appellant to submit any relevant documents or information forming the basis of their appeal. Register of social microfinance groups 16.-(1) Pursuant to Section 54 of the Act, the Bank or Delegated Authority shall establish and maintain a register of social microfinance groups. (2) The register referred to in sub-regulation (1) shall contain the following information: (a) name, address, and contact details of the group; (b) names and contact details of group leaders; (c) service area;

Kanuni Za Huduma Ndogo za Fedha (Vikundi vya Huduma Ndogo za Fedha Vya Kijamii) Tangazo la Serikali No. 997 (Continued.) 10 (d) registration number; (e) date of registration; (f) number of members; and (g) any other information the Bank or Delegated Authority deems appropriate. Cancellation of registration 17.-(1) The Bank or Delegated Authority, upon being satisfied that a registered social microfinance group has failed to meet registration requirements or conditions, or has violated the Act or these Regulations, may cancel the certificate of registration and remove the group's name from the register. (2) If the Bank or Delegated Authority cancels a social microfinance group's registration, it shall provide the group with written notice explaining among other things, the reasons for the decision. (3) A social microfinance group dissatisfied with the Bank or Delegated Authority's decision under sub-regulation (1) may, within thirty days from receiving written notice: (a) if it is a decision of the Delegated Authority, appeal to the Bank; or (b) if it is a decision of the Bank, appeal to the Minister. (4) The conditions of regulation 15 regarding appeals shall apply as applicable with minor appropriate amendments. PART FOUR: OPERATION Commencement of operational activities 18.-(1) A registered social microfinance group shall commence self-operation within three months from the date of registration. (2) The Bank or Delegated Authority may, by fourteen days' written notice, cancel the registration of any social microfinance group that has failed to commence self-operation according to sub-regulation (1). (3) A registered social microfinance group dissatisfied with the Bank or Delegated Authority's decision under sub-regulation (2) may, within thirty days from receiving written notice: (a) if it is a decision of the Delegated Authority, appeal to the Bank; or (b) if it is a decision of the Bank, appeal to the Minister. (4) The conditions of regulation 15 regarding appeals shall apply as applicable with any minor appropriate amendments. Permitted and prohibited activities 19.-(1) Pursuant to Section 36 of the Act, permitted activities by a social microfinance group shall include: (a) promoting the collection of contributions from its members; (b) providing loans to its members; (c) promoting fund collection for the social and economic welfare of its members; and (d) any other activities approved by the Bank. (2) A social microfinance group shall not be permitted to carry out the following activities: (a) receiving deposits from non-members; (b) opening branches, agents, or service centers; or (c) any other activities as specified by the Bank. Operational conditions 20.-(1) Regardless of any other provisions in these Regulations to the contrary, a registered social microfinance group shall: (a) have a physical address or area where it meets to conduct microfinance business; (b) operate its microfinance business in accordance with the Act, these Regulations, and the group's constitution; (c) open and operate a bank account or any financial institution account or any type of account for conducting its activities; (d) be accountable to the Bank or Delegated Authority; (e) distribute profits or pay interest to its members according to its constitution; (f) keep and maintain basic financial records and other relevant information regarding its operation; (g) enable financial accounts and records to be tracked or audited as specified in these Regulations; (h) keep and maintain minutes of meetings, member registers, copies of the constitution, and other important records; (i) appoint a person responsible for internal control of financial matters as specified in the Regulations; (j) submit reports and other important matters to the Bank or Delegated Authority as specified in these Regulations; and (k) adhere to consumer protection principles under the Act and these Regulations. (2) The Bank or Delegated Authority may issue circulars and guidelines to facilitate the implementation of operational conditions under sub-regulation (1). Submission of reports 21.-(1) A social microfinance group shall, every quarter, submit basic financial records and other important matters to the Bank or Delegated Authority. (2) Reports referred to under sub-regulation (1) shall be submitted in the manner specified in the Third Schedule and, at minimum, shall include: (a) members' contributions, promoted contributions, loan lists, expenditures, income, surplus distribution, and group loans; (b) records of attendance, meeting numbers, and relevant matters for meetings held within the quarter; and (c) other important information as may be specified by the Bank or Delegated Authority. Governance of the social microfinance group 22.-(1) A social microfinance group shall ensure that all matters concerning group governance are specified in its constitution. (2) For the purpose of good governance, a social microfinance group shall ensure: (a) it convenes meetings including ordinary and general meetings in the manner specified in its constitution; (b) it democratically elects honest leaders according to its constitution; (c) there is transparency and accountability in its affairs to its members; and (d) it performs other activities to ensure good governance. Consumer protection 23. For the purpose of adhering to consumer protection principles, each social microfinance group shall: (a) have procedures for handling complaints and resolving disputes, and appoint one or more members within the group to handle member complaints and disputes, as specified in its constitution; (b) have a system for providing financial education to its members; (c) ensure that loan/service criteria and conditions are clear, fair, acceptable, and protect members' rights; (d) make information regarding the group's performance open to members; (e) ensure that every group member understands the constitution and is provided with a copy of the constitution; (f) ensure that debt collection and recovery procedures protect members' rights; and (g) perform any other activities intended to protect the rights and interests of its members. Collaboration with other institutions 24.-(1) A social microfinance group may collaborate with other institutions for the purpose of better operation of its activities, including access to: (a) financial services from banks and financial institutions, including loans and bank accounts;