2022-01-01

On the Establishment of a Legal Reserve

Issued by the Central Bank of Djibouti via Instruction No. 2022-16/IMF, this directive mandates all microfinance institutions to establish a legal reserve funded by a mandatory 15% annual levy on net surpluses after offsetting any carried-forward deficits, irrespective of the reserve's cumulative balance relative to share capital. The reserve may only be utilized to cover losses once all other available reserves have been fully exhausted, and its creation does not preclude the maintenance of statutory or voluntary reserves. This instruction enters into force immediately upon its signature.

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CENTRAL BANK OF DJIBOUTI

INSTRUCTION No. 2022-16/IMF

ON THE ESTABLISHMENT OF A LEGAL RESERVE

The Governor of the Central Bank of Djibouti,

Having regard to Law No. 118/AN/11/6th L of 22 January 2011 amending the statutes of the Central Bank of Djibouti;

Having regard to Law No. 179/AN/07/5th L of 16 May 2007 regulating microfinance activities on the territory of the Republic of Djibouti;

Having regard to Law No. 117/AN/11/6th L of 25 May 2011 regulating financial cooperatives;

Having regard to the Commercial Code, Book 3 on Company Law;

Having regard to Law No. 119/AN/11/6th L of 22 January 2011 on the establishment and supervision of credit institutions and financial auxiliaries;

Having regard to Decree No. 2018-171/PRE of 8 May 2018 appointing the Governor of the Central Bank of Djibouti.

Orders:

Article 1: With a view, in particular, to promoting a systematic strengthening of their equity through the allocation of surplus results, microfinance institutions shall establish a reserve, funded by an annual levy on net surpluses generated, after offsetting, where applicable, any carried-forward deficit.

Article 2: For all microfinance institutions, the legal reserve rate is set at 15% of net surpluses after offsetting the carried-forward deficit. Funding the reserve is mandatory, regardless of the level reached by the cumulative amount of this reserve relative to the share capital of the concerned institution.

Article 3: The legal reserve does not exclude statutory and voluntary reserves.

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Article 4: The legal reserve may be used to cover losses, provided that all other available reserves are utilized beforehand.

Article 5: This instruction shall enter into force as of its signature.

Done in Djibouti, on 14 March 2022

The Governor

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