Regulatory Alerts2023-01-04
Added · Updated
Central Bank of Jordan Instructions on Fees for Microfinance Companies No. 1/2023
The Central Bank of Jordan issued Instructions No. 1/2023 establishing maximum fee limits for microfinance companies operating in the Kingdom, effective 90 days after publication. The document prohibits fees not listed in the attached schedule and caps specific charges, such as a 1% credit granting fee and fixed late payment amounts based on installment size. It mandates transparent disclosure of all fees and restricts late payment fee calculations to a maximum of 120 days. Additionally, the instructions define early repayment procedures and authorize the Bank to impose penalties for violations under the Banking Law.
In the Name of Allah, the Most Gracious, the Most Merciful
[Logo of the Central Bank of Jordan]
Reference No.: 25/4/27 Date: 4/6/1444 AH Corresponding to: 5/1/2023 AD
Instructions on Fees for Microfinance Companies No. (1/2023)
Issued pursuant to the provisions of Articles (4/b/13), (43/h), and (65/b) of the Central Bank of Jordan Law No. (23) of 1971 and its amendments, and the provisions of Article (17/b) of the Microfinance Companies System No. (107) of 2021.
Article (1): These Instructions shall be known as the "Instructions on Fees for Microfinance Companies" and shall apply to all microfinance companies operating in the Hashemite Kingdom of Jordan, as well as to microfinance activities and services provided in accordance with Islamic Sharia principles, to the extent that such application does not conflict with their nature. These Instructions shall come into effect ninety (90) days from the date of their publication in the Official Gazette.
Article (2): The following words and phrases shall have the meanings specified below wherever they appear in these Instructions, unless the context or circumstances indicate otherwise:
- The Kingdom: The Hashemite Kingdom of Jordan.
- The Bank: The Central Bank of Jordan.
- The Company: A microfinance company licensed in accordance with the provisions of the Financing System No. (107) of 2021.
- Fees: Commissions, expenses, and/or any other amounts charged by the Company for the loan/financing and for any other activities or services provided to clients, excluding interest/returns.
Article (3): a. The maximum limits of fees that a Company may collect for the activities and services it provides to its clients shall be as set forth in the table attached to these Instructions. The Company shall not impose any fee (under any name) not listed in this table. b. The Bank shall consider any request received from Companies regarding any fee not listed in the attached table, provided that the request includes justifications for such fee, and that the amendment is published in the Official Gazette.
Article (4): a. The Company shall follow the procedures below in the event of early repayment, whether initiated by the client or through another financing entity:
- If the interest rate is declining:
- If the client wishes to repay the loan within the first six installments of the loan's life: The remaining amounts of the first six installments shall be collected in full (principal and interest), and then the client shall repay the remaining loan balance after the sixth installment (principal only, excluding remaining interest).
- If the client wishes to repay the loan after the sixth installment: The client shall repay the loan balance as it stands on the repayment date (principal only, excluding remaining interest).
- If the interest rate is fixed or it is a discounted loan: The loan shall be recalculated based on a declining interest rate, and then the client shall repay the loan balance as described in item (1) above. b. In the event of an increase in the loan amount (Top-Up), the following shall be taken into account:
- The procedures set forth in item (a) above shall be followed for calculating the remaining loan amount for repayment.
- No early repayment fee shall be calculated on the repayment amount.
Article (5): For the purpose of calculating late payment fees, the Company shall not impose any fees after four months from the date the client stopped making payments. Late payment fees shall be calculated for each installment separately (with the number of late days for each installment not exceeding 30 days), and calculations shall cease after four months. The total number of late days in the event of payment stoppage (for the purpose of calculating penalties) shall not exceed one hundred twenty (120) days.
Article (6): The Company shall transparently disclose to clients, through all available means that ensure the information reaches them (including the Company's website), the fee rates it charges for all activities and services provided, and any amendments thereto, keeping them continuously updated.
Article (7): a. The provisions of these Instructions do not apply to fees associated with conditions imposed by a third party, which shall be specified in the contract signed with the client. b. The Company shall not add any fees, insurance, or any other additional amounts exceeding the costs specified in the contract signed with the client.
Article (8): In the event that the Company violates any of the provisions of these Instructions, the Bank may impose any one or more of the penalties and measures set forth in the Banking Law No. (28) of 2000 and its amendments.
[Signature] The Governor Dr. Adel Al-Sharkas
- Attachment (Table of Fee Price Caps)
Attachment Maximum Fee Limits for Microfinance Companies' Activities and Services
| Type of Fee | Maximum Limits |
|---|---|
| Credit Granting Fee (One-time upon granting) | - 1% of the credit value: If the credit value is less than 1,000 JOD<br>- 1% of the credit value + 10 JOD: If the credit value is between 1,000 - 10,000 JOD<br>- 1% of the credit value + 20 JOD: If the credit value is more than 10,000 JOD |
| Late Payment | - 0.25 JOD if the installment is less than 50 JOD<br>- 0.5 JOD if the installment is between 50 - 200 JOD<br>- 1 JOD if the installment is between 200 - 400 JOD<br>- 2 JOD for installments exceeding 400 JOD |
| Postponement of Monthly Installment | - 2.5 JOD if the installment is less than 50 JOD<br>- 5 JOD if the installment is between 50 JOD to 150 JOD<br>- 10 JOD if the installment is more than 150 JOD |
| Early Repayment | - Remaining period to the due date of the last installment (3 months or less): No fee<br>- Remaining period to the due date of the last installment (more than 3 months): 2% on the repayment amount<br>- Request to settle the debt through another financing entity regardless of the remaining period to the due date of the last installment: 5% on the repayment amount |
| Certificate of No Objection | 5 JOD |
| Certificate of Commitments | 5 JOD |
| Request to Amend Financing Terms or Guarantees based on Client Request | 5 JOD |
| Stopping/Withdrawing a Check | 5 JOD + Bank Fee |
| Withdrawing Collection Checks in Case of Early Repayment | 1 JOD per check |
| Check Settlement Letter | 2 JOD |
| Issuance of Deduction Letter to Other Entities | 5 JOD |
| Account Statement based on Client Request | 1 JOD |
| Release of Lien | 5 JOD |