Instruction No. 006-DOM/20 of September 18, 2020 on the establishment of an exceptional refinancing instrument to support the activities of Microfinance Institutions (MFIs)

CENTRAL BANK OF MADAGASCAR

DIRECTION OF MONETARY OPERATIONS

INSTRUCTION NO. 006-DOM/20 on the establishment of an exceptional refinancing instrument to support the activities of Microfinance Institutions (MFIs)

The Governor of the Central Bank of Madagascar,

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. 2016-004 of July 29, 2016, supplemented by Law No. 2016-057 of February 2, 2017 establishing the Statutes of the Central Bank of Madagascar,

Having regard to Law No. 2017-026 of February 8, 2018 on Microfinance,

Having regard to Decree No. 2019-2069 of November 6, 2019 repealing the provisions of Decree No. 2014-1684 of October 29, 2014 on the appointment of the Governor of the Central Bank of Madagascar and appointing the Governor of the Central Bank of Madagascar,

Having regard to Instruction No. 006-DOM/19 of October 25, 2019 on money market instruments,

DECIDES

Article 1: CONTEXT

In light of the consequences suffered by Microfinance Institutions (MFIs) due to the prevailing global health situation, the Central Bank of Madagascar (BFM) is establishing an exceptional credit line in favor of banks governed by Law No. 95-030 of February 22, 1996 on the activity and supervision of credit institutions, or the "Banking Law".

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Article 2: OBJECT

Within this specific framework stipulated in Article 1 of this Instruction, the market instrument provided for in Article 9 of Instruction No. 006-DOM/19 of October 25, 2019 on money market instruments is subject to a specific implementation.

Article 3: SCOPE OF APPLICATION

The application of the provisions of this Instruction is exclusively linked to the support by banks of Microfinance Institutions.

For the purposes of this Instruction, all MFIs approved by the Banking and Financial Supervision Commission are among the beneficiaries of this financial support from the BFM.

Article 4: IMPLEMENTATION MODALITIES

This article prescribes the specific implementation modalities for the instrument provided for in Article 9 of Instruction No. 006-DOM/19 of October 25, 2019 on money market instruments.

4.1 The BFM may launch fixed-rate liquidity injection operations with total or partial allocation of bids, with maturities of up to three (3) years. The adjudication of offers submitted by banks remains at the discretion of the BFM based on the evolution of monetary aggregates and monetary stability.

4.2 These operations are launched at most once per month, on the first Friday of the month.

4.3 The rate for these exceptional liquidity injection operations is set at 2.50%.

4.4 Banks must indicate in their submission, in accordance with the template in Annex I, the amount of their bid relative to this rate set by the BFM.

4.5 Eligible collateral for this exceptional refinancing are Treasury Bills (BTA) and Treasury Bonds (BTF), respecting the collateral coverage principle for liquidity injection operations on the money market. Upon the launch of repurchase operations, this type of refinancing will comply with the processing modalities for any liquidity injection operation by the BFM.

Article 5: OBLIGATIONS AND SANCTIONS

Under penalty of early termination in case of non-compliance with the obligations arising from this Instruction, banks benefiting from the exceptional refinancing from the BFM are required to:

• exclusively allocate the funds obtained under this Instruction to support the MFIs indicated in Article 3 above.
• report to the BFM, with a copy to the General Secretariat of the Banking and Financial Supervision Commission, all information relating to credits granted under this Instruction in accordance with the template in Annex II. Reporting is done monthly and at the latest one week before the next adjudication, even for banks that do not yet intend to submit to a new BFM announcement.
• account for the refinancing received from the BFM under this Instruction in a distinct dedicated sub-account within account 116 "Term Borrowings – Central Bank" on the liability side of their balance sheet.

Article 6: RESTRICTIONS

Banks that have already received liquidity via the instrument governed by this Instruction may not submit to other operations on the same instrument until the previously obtained funds have been exhausted. This exhaustion is characterized by the unavailability and retention by the MFIs of the entire amount lent by the BFM at the time of the operation's launch.

Article 7: FINAL PROVISIONS

Without prejudice to the specific provisions stated above, the procedures applicable to exceptional refinancing operations governed by this Instruction are identical to those for fixed-rate operations with total or partial allocation of bids stipulated in Article 9 of Instruction No. 006-DOM/19 of October 25, 2019 on money market instruments.

Article 8: ANNEXES

The annexes form an integral part of this Instruction.

Article 9: ENTRY INTO FORCE

This Instruction enters into force as of the date of its signature.

Article 10:

All provisions contrary to this Instruction are hereby repealed, including those of Instruction No. 003-DOM/20 of May 28, 2020 annulling and replacing the provisions of Instruction No. 002-DOM/20 of April 10 on the establishment of an exceptional refinancing instrument to support the activities of MSMEs, as well as Instruction No. 004-DOM/20 of July 16, 2020 amending certain provisions of Instruction No. 003-DOM/20.

Antananarivo, September 18, 2020

THE GOVERNOR Henri Edmond RABARIJOHN

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ANNEX I

SUBMISSION FOR EXCEPTIONAL LIQUIDITY INJECTION OPERATIONS TO SUPPORT THE ACTIVITIES OF MICROFINANCE INSTITUTIONS

Bank Name: Rate: Launch Date:

SUBMISSION
Total Amount (in Ar)
In Figures

COLLATERAL:

Total collateral amount(1) (2): Ariary……………… Interest amount: Ariary ………………

ORDER NO.	NATURE	REFERENCE	ACQUISITION RATE	MATURITY	NUMBER OF SECURITIES	NOMINAL AMOUNT OF SECURITY (In Ariary)
						In Words
TOTAL...

(1) Requested amount plus interest (2) Multiple of 100 million Ariary.

At _______________, on _______________ (Authorized signatures and bank seal)

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ANNEX II

ESTABLISHMENT NAME Date:

List of MFIs that have received credit, subject to exceptional refinancing by the BFM under Instruction No. 006-DOM/20 on the establishment of an exceptional refinancing instrument to support the activities of Microfinance Institutions (MFIs) for the month of ……………

Rank	Beneficiary Name	Nature of Credit	Amount of Credit Disbursed	Installment Amount	Disbursement or Establishment Date	1st Repayment Date	Credit Duration	Maturity Date	Other Information
1									- Credit Rate<br>- Activity Sector<br>- Turnover<br>- Etc.
...
n
	TOTAL

Authorized signature and seal