Microfinance Regulations (Savings and Credit Cooperatives) 2019

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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THE UNITED REPUBLIC OF TANZANIA

MICROFINANCE REGULATIONS (SAVINGS AND CREDIT COOPERATIVE SOCIETIES) OF 2019

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[SUBSIDIARY LEGISLATION]

This edition of the Microfinance Regulations (Savings and Credit Cooperative Societies) of 2019 is the Official Translation certified by the Attorney General's Office pursuant to Section 84 of the Interpretation of Laws Act, Chapter 1.

Dodoma, ADELARDUS L. KILANGI,
………………., 2020 Attorney General

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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GOVERNMENT NOTICE No. 675 Published on 13/9/2019

MICROFINANCE ACT
(CHAPTER 407)

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REGULATIONS

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(Made under Section 60)

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MICROFINANCE REGULATIONS (SAVINGS AND CREDIT COOPERATIVE SOCIETIES), 2019

Name of the Regulations
PART ONE
PRELIMINARY PROVISIONS

1. Name.
2. Application.
3. Interpretation.

PART TWO
ISSUANCE OF LICENSES

4. Prohibition on conducting microfinance business without a license.
5. Application and conditions for license.
6. Processing of applications.
7. Inspection prior to license issuance.
8. License.
9. Refusal of license.
10. Appeal.
11. Upgrade of SACCOS license.
12. Cancellation of license.
13. Permitted and prohibited activities.
14. Business premises.
15. Opening branches.
16. Transfer of business premises.
17. Operating services outside the center.

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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PART THREE
CAPITAL ADEQUACY

18. Minimum capital level.
19. Prohibition on capital transfer.
20. Distribution of net profit.
21. Reserve fund.
22. Payment of dividends, interest, and other shares.
23. Capital increase plan.

PART FOUR
GOVERNANCE

24. Board structure and duties.
25. Audit and disqualification of Board members.
26. Appointment and duties of the loan committee.
27. Employment and duties of SACCOS managers.

PART FIVE
LENDING OPERATIONS

28. Lending policy.
29. Loan applications.
30. Loan approval.
31. Loan contract.
32. Submission of reasons for loan application rejection.
33. Loan collateral.
34. Loan guarantee.
35. Transactions with related parties.
36. Setting interest rates, fees, and penalties.
37. Early loan repayment.
38. Criteria and conditions for loan participation.
39. Micro-loans.
40. Classification of loan groups and loan portfolio.
41. Accumulation of interest on micro-loans.
42. Adjustment of loan terms.
43. Loan write-off.

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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PART SIX
LIQUIDITY, ASSET AND LIABILITY MANAGEMENT

44. Asset and liability management policy.
45. Liquidity contingency plan.
46. Minimum asset liquidity ratio.
47. Deposits in banks.
48. Borrowing outside SACCOS.
49. Investment policy.
50. Investment conditions.

PART SEVEN
ACCOUNTING AND AUDIT

51. Accounting books, records, and financial year.
52. Preparation and submission of accounts.
53. Disclosure of financial information.
54. Appointment of internal auditor.
55. Issuance of internal auditor report.
56. Duties of internal auditor.
57. Internal audit plan.
58. Hiring internal auditor.
59. External audit.
60. External auditor access to employees.
61. Reporting to the Bank or Regulated Authority.
62. Submission of audit report to the Annual General Meeting.
63. Replacement of external auditor.
64. Term of external auditor.

PART EIGHT
SUPERVISION AND CONTROL

65. Inspection of SACCOS.
66. Investigation.
67. Submission of reports.
68. Joint supervision agreements.
69. Issuance of prohibition and restriction orders.
70. Management and takeover of operations.
71. Limit of supervision by the Bank or Regulated Authority.

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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PART NINE
PROTECTION OF MEMBERS

72. Transparency conditions for shares, reserves, and deposits.
73. Transparency for interest-bearing accounts.
74. Transparency of additional information.
75. Transparency of account term changes.
76. Transparency in loan issuance.
77. Complaint and dispute resolution system.
78. Transparency for loan guarantors.
79. Loan collection or tracking.
80. Financial education.
81. Compliance with consumer protection laws.

PART TEN
GENERAL CONDITIONS

82. Business development plan.
83. Submission of loan reports.
84. Approval for exchange of loan information.
85. Administrative measures.
86. Upgrading SACCOS.
87. Transitional period.
88. Agreements between SACCOS and employers.

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SCHEDULE

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Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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GOVERNMENT NOTICE No. 675 Published on 13/9/2019

MICROFINANCE ACT,
(Chapter 407)

---

REGULATIONS

---

(Made under Section 60)

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MICROFINANCE REGULATIONS (SAVINGS AND CREDIT COOPERATIVE SOCIETIES), 2019

PART ONE
PRELIMINARY PROVISIONS

Name 1. These Regulations shall be known as the Microfinance Regulations (Savings and Credit Cooperative Societies), 2019.

Application 2. These Regulations shall apply to all microfinance service providers who are in Grade 3.

Interpretation 3. In these Regulations, unless the context otherwise requires:

"Chapter 407 'Act'" means the Microfinance Act;

"bank agent" means a business providing banking services to customers of a banking institution on behalf of the banking institution under a valid agency contract;

"Chapter 197 'Bank'" means as defined under the Bank of Tanzania Act;

"branch" means a part of a SACCOS business different from its head office, which has been approved by the Bank or Regulated Authority to operate administratively as a branch;

"prohibition and restriction order" means an administrative order taken by the Bank or Regulated Authority against a SACCOS to prevent unsafe and unprofitable matters from occurring;

"Chapter 185"

"COASCO" means the Cooperative Audit and Supervision Agency established under the Cooperative Audit and Supervision Act;

"Commission" means the Tanzania Cooperative Development Commission established under the Cooperative Societies Act;

"user" means a customer or member of a microfinance service provider who obtains or intends to obtain microfinance services;

"share capital" means fully paid member shares, legal reserve funds, additional accumulation, capital assistance, and contributions that are not transferable and are not intended to be refunded unless the SACCOS is placed in liquidation;

"credit information sharing institution" means a specialized institution that collects and sells credit information of individuals and institutions;

"Regulated Authority" means as defined under the Act;

"joint loans" means a procedure whereby one or more SACCOS borrow from financial institutions by guaranteeing other SACCOS based on written agreements;

"Chapter 394 'micro-insurance'" means as defined under the Insurance Act;

"micro-leasing" means financial leasing activities where the average value of the asset list reaches ten million shillings and the maturity period of that lease does not exceed twenty-four months;

"microfinance business" means as defined under the Act;

"micro-loan" means a loan provided to small businesses, households, and individuals;

"Minister" means the Minister responsible for

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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financial matters;

"Chapter 423 'money laundering'" means as defined under the Proceeds of Crime Act;

"service center" means a part of a SACCOS business beyond a branch approved by the Bank or Regulated Authority to conduct limited SACCOS activities;

"business premises" means a branch, office, agent, service center, or mobile service of a microfinance service provider open to the public;

"Register" means the register of SACCOS licensed under the Act;

"Chapter 211"

"SACCOS" means a Savings and Credit Cooperative Society registered under the Cooperative Societies Act;

"Grade 3" means the grade of microfinance service providers comprising SACCOS.

PART TWO
ISSUANCE OF LICENSES

Prohibition on conducting microfinance business without license

4.-(1) A SACCOS shall not conduct any microfinance business unless that SACCOS has been issued a license by the Bank or Regulated Authority in accordance with the conditions of the Act.

(2) Any SACCOS that violates the condition of sub-regulation (1) shall have committed an offense, and if convicted, shall be punished as specified under Section 16 of the Act.

Application and conditions for license

5.-(1) A SACCOS shall apply for a license to conduct microfinance service activities under Grade A or B to the Bank or Regulated Authority in the manner specified in the First Schedule of these Regulations.

(2) Applications referred to under sub-regulation (1) for Grade A licenses shall be accompanied by-

(a) a copy of the SACCOS bylaws certified for the purpose of applying for a license;

(b) a certified copy of the registration certificate issued by the Commission;

(c) full names and addresses of Board members, management committee members, and officers of the SACCOS;

(d) personal profiles and certified copies of academic and professional certificates of Board members and executive officers;

(e) a copy of the lending policy;

(f) a copy of the Tanzania National ID, voter's card, travel document, or any other identification accepted by the Bank or Regulated Authority for each Board member and executive officer;

(g) two "passport-size" photos of Board members and executive officers;

(h) evidence of facilities for cash storage and security at the office building;

(i) a resolution of the general meeting to apply for a license;

(j) evidence that the SACCOS has employed or contracted an internal auditor who will be responsible, among other duties, for monitoring and ensuring the correct and strict implementation of the internal control system; and

(k) evidence that the SACCOS has an Information Management System.

(3) An application referred to under sub-regulation (1) for Grade B licenses shall be accompanied by-

(a) all items listed under sub-regulation (2) of these Regulations;

(b) a three-year business operation plan including:

(i) liability details;

(ii) management structure;

(iii) products and services;

(iv) plans to open branches where necessary;

(v) growth strategy; and

(vi) estimated information on available funds, income statements, cash flow, and estimates used in making projections for three years of operation.

(c) investment policies, human resources, reserves, liquidity, cash, collection procedures, and internal control guidelines; and

(d) evidence that there is sufficient insurance coverage.

(4) The license application shall be accompanied by a non-refundable application fee of one million shillings for a Grade A license and three million shillings for a Grade B license.

Processing of applications

6.-(1) The Bank or Regulated Authority shall make a decision within thirty days from the date of receiving complete applications, and if satisfied with the applications, shall issue the license.

(2) If the Bank or Regulated Authority receives license application documents that are incomplete, before processing the applications, it shall require the applicant to-

(a) submit missing documents or information or additional documents; or

(b) correct or rectify deficiencies related to license issuance conditions.

Inspection prior to license issuance

7. Before issuing a license, the Bank or Regulated Authority may conduct an inspection of the SACCOS building's communication facilities, accounting, and internal control systems.

License

8.-(1) If the criteria and conditions for license issuance are met, the Bank or Regulated Authority shall issue a license to the SACCOS in the manner specified in the Second Schedule of these Regulations.

(2) The issued license shall remain valid unless suspended or cancelled in the manner specified in the Act.

(3) A license issued under these Regulations shall expire if business does not commence within six months from the date of issuance of that license, unless the Bank or Regulated Authority has extended that period in writing.

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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Refusal of license.

9.-(1) The Bank or Regulated Authority may refuse to issue a license if-

(a) the applicant has failed to meet the criteria and conditions specified for obtaining a license; or

(b) the applicant has provided false or misleading information.

(2) If the Bank or Regulated Authority refuses to issue a license, it shall inform the applicant in writing of the reasons for refusing to issue the license within seven days from the date of that decision.

(3) An applicant whose application has been rejected may re-apply if they have rectified the deficiencies that caused the initial application to be rejected.

Appeal

10.-(1) An applicant who is not satisfied with the decision of the Bank or Regulated Authority under regulation 9 may, within twenty-one days from the date of those decisions-

(a) if the decision was made by the Regulated Authority, appeal to the Bank;

or

(b) if the decision was made by the Bank, appeal to the Minister.

Government Notice
No.
575 of 2019

(2) An appeal under sub-regulation (1) shall be in writing and shall clearly state-

(a) the type of 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 Regulations (Duties of the Minister), 2019.

(4) Pursuant to sub-regulation (1), the Bank shall make appeal decisions within sixty days from the date of receiving the appeal.

(5) In making appeal decisions, the Bank may require the appellant to submit all relevant information and documents forming the basis of that appeal.

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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Upgrade of
SACCOS license

11.-(1) If after evaluation the Bank or Regulated Authority is satisfied that a SACCOS with a Grade A license meets the initial capital conditions of a SACCOS with a Grade B license, the Bank or Regulated Authority may direct that SACCOS to apply for a license under Grade B.

(2) If a SACCOS fails to execute the directions issued under sub-regulation (1) without reasonable cause, the Bank or Regulated Authority shall take appropriate action to ensure its implementation.

Cancellation of license

12.-(1) The Bank or Regulated Authority may, by giving notice to the SACCOS, cancel the license if the SACCOS-

(a) has ceased to conduct microfinance business;

(b) violates the terms and conditions specified in the license;

(c) has been closed, liquidated, or dissolved;

(d) has been deregistered under the relevant laws; or

(e) has violated the conditions of the Act.

(2) The Bank or Regulated Authority shall publish the name of the microfinance service provider whose license has been cancelled in the Government Gazette and in a widely circulated newspaper within fourteen days from the cancellation of that license.

Permitted and prohibited activities

13.-(1) A SACCOS with a Grade A license may conduct the following activities:

(a) issuing membership and voluntary shares;

(b) receiving savings from its members;

(c) providing loans to its members;

(d) conducting investments; and

(e) other activities as permitted by the Bank or Regulated Authority.

(2) A SACCOS with a Grade B license may conduct any of the following activities:

(a) all activities under sub-regulation (1) of

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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this regulation;

(b) receiving deposits from its members;

(c) providing joint loans;

(d) providing micro-leasing;

(e) providing micro-insurance agency services;

(f) acting as a bank agent after approval by the Bank or Regulated Authority;

(g) investing in capital;

(h) issuing debit cards; and

(i) other activities as directed by the Bank or Regulated Authority.

(3) Unless otherwise directed by the Bank or Regulated Authority, a SACCOS with a license shall not conduct the following activities-

(a) operating a business account for its customers;

(b) receiving deposits from non-members;

(c) foreign exchange business;

(d) operating overseas businesses;

(e) guarantee activities;

(f) credit cards;

(g) payment orders and fund transfers;

(h) other businesses except providing financial services to its members;

(i) other activities as directed by the Bank or Regulated Authority.

Business premises

14.-(1) Each SACCOS shall have-

(a) a business premises or business premises with a correct address for conducting microfinance business; and

(b) clearly display its business name at the business premises.

Opening branches

15.-(1) A SACCOS with a Grade B license intending to expand its services by opening a branch shall apply in writing for approval from the Bank or Regulated Authority.

(2) Applications submitted under sub-regulation (1)

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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shall be accompanied by the following-

(a) the area proposed for opening the branch;

(b) the purpose and objectives of opening the new branch;

(c) a budget analyzed and the source of funds for establishing that branch;

(d) estimated balance sheets and income and expenditure statements for a period of two years after the branch commences operations;

(e) proposals for the branch structure, names, and personal profiles of key employees in the branch; and

(f) any other information as the Bank or Regulated Authority may require.

(3) In evaluating applications under sub-regulation (2), the Bank or Regulated Authority shall consider-

(a) the operational capacity of the proposed branch;

(b) the financial capacity of the SACCOS to operate the proposed branch;

(c) whether the SACCOS meets the minimum capital requirement;

(d) the expertise and capacity of the executives of the proposed branch;

(e) whether the proposed branch meets security criteria at least at a minimum level; and

(f) any other criteria as directed by the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may conduct an inspection of the proposed branch building before commencing operations.

(5) A SACCOS with a Grade A license is not permitted to open a branch.

Transfer of business premises

16.-(1) A SACCOS intending to transfer its business premises shall apply in writing for approval from the Bank or Regulated Authority, and those applications shall be accompanied by the following information:

(a) reasons for transferring the business;

(b) a plan for paying or transferring claims, assets, and debts;

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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(c) completion of preparations for the new business premises; and

(d) any other information as the Bank or Regulated Authority may direct.

(2) A SACCOS that fails to comply with the conditions of this regulation shall have committed an offense.

Operating services outside the center

17.-(1) A SACCOS shall not open or provide services outside the center without written permission from the Bank or Regulated Authority issued in accordance with the conditions of these Regulations.

(2) An application for permission issued under sub-regulation (1) shall be accompanied by the following-

(a) information on the security status and available location for the SACCOS to provide services; and

(b) any other information as the Bank or Regulated Authority may require.

PART THREE
CAPITAL ADEQUACY

Minimum capital level

18.-(1) A SACCOS with a Grade A license shall commence business and ensure at all times it has share capital of not less than ten million shillings.

(2) A SACCOS with a Grade B license shall commence business by ensuring at all times it has share capital of not less than two hundred million shillings.

(3) Each SACCOS shall be required at all times to have-

(a) share capital of not less than eight percent of total assets;

(b) institutional capital of not less than six percent of total assets; and

(c) net institutional capital of not less than six percent of total assets.

(4) Without affecting sub-regulations (1) and (2), the Bank or Regulated Authority may require a higher level than the minimum capital level or capital adequacy ratios for a SACCOS if the SACCOS-

(a) may incur losses due to capital deficiency;

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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(b) has a high-risk environment;

(c) has a high level or large amount of poor-quality assets; or

(d) grows rapidly without having a sufficient level of capital and risk control.

Prohibition on capital transfer

19. Unless approved by the Bank or Regulated Authority, a SACCOS shall not transfer funds from share capital or legal reserve funds if the institutional capital ratio is below the required minimum ratio.

Distribution of net profit

Chapter 211

20. Pursuant to its bylaws, a SACCOS may distribute any remaining net profit after all expenses are paid and capital conditions are met for the following purposes-

(a) share dividends in the form of cash or setting aside in member shares;

(b) contribution to the development fund or transitional capital account;

(c) contribution for charity, education, medical, or other purposes under the Cooperative Societies Act;

(d) paying allowances to Board members and other unpaid officers; and

(e) other payments as approved by the annual general meeting.

Reserve fund

21. Each SACCOS shall have a reserve fund and institutional capital by setting aside at least twenty percent of net profit after expenses and all costs are paid.

Payment of dividends, interest and other shares

22.-(1) Pursuant to Section 37 of the Act, each SACCOS shall include in its bylaws mandatory payments of dividends, interest, or other types of shares to its members, including the manner and period

Microfinance Regulations (Savings and Credit Cooperatives) Government Notice No. 966 (Continued.)

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for payment, and the manner of calculating the amount of dividends, interest, or other shares to be paid to members.

(2) The payment of dividends, interest, or other shares shall be made after the SACCOS has met the minimum capital requirements and has sufficient reserves to cover potential losses.

(3) The distribution of profits shall be approved by the Annual General Meeting.

Capital increase plan

23.-(1) A SACCOS shall prepare a capital increase plan if it intends to increase its capital.

(2) The capital increase plan shall include-

(a) the reasons for increasing capital;

(b) the amount of capital to be increased;

(c) the source of funds for the capital increase;

(d) the impact of the capital increase on the SACCOS's operations;

(e) the timeline for the capital increase; and

(f) any other information as the Bank or Regulated Authority may require.

(3) The Bank or Regulated Authority shall approve the capital increase plan within thirty days from the date of receiving the plan.

(4) If the Bank or Regulated Authority does not approve the capital increase plan, it shall inform the SACCOS in writing of the reasons for the rejection within thirty days from the date of receiving the plan.

(5) A SACCOS whose capital increase plan has been rejected may re-apply if it has rectified the deficiencies that caused the initial plan to be rejected.

PART FOUR
GOVERNANCE

Board structure and duties

24.-(1) Each SACCOS shall have a Board of Directors consisting of not less than five and not more than fifteen members.

(2) The Board of Directors shall be elected by the General Meeting.

(3) The Board of Directors shall have the following duties-

(a) to formulate the SACCOS's strategic plan;

(b) to oversee the management of the SACCOS;

(c) to ensure compliance with laws and regulations;

(d) to approve the SACCOS's annual budget;

(e) to approve the SACCOS's annual accounts;

(f) to appoint the manager of the SACCOS;

(g) to review the performance of the manager;

(h) to ensure the adequacy of the SACCOS's internal control system;

(i) to ensure the adequacy of the SACCOS's risk management system; and

(j) to perform any other duties as prescribed by the Act or these Regulations.

Audit and disqualification of Board members

25.-(1) A person shall not be eligible to be a member of the Board of Directors if that person-

(a) is an undischarged bankrupt;

(b) has been convicted of an offense involving fraud or dishonesty;

(c) has been removed from office as a director of a company for misconduct;

(d) is a member of the Board of Directors of another SACCOS;

(e) is an employee of the SACCOS;

(f) is a relative of an employee of the SACCOS;

(g) is a member of the management committee of the SACCOS; or

(h) has been disqualified from being a member of the Board of Directors by the Bank or Regulated Authority.

(2) A member of the Board of Directors shall vacate office if that person-

(a) resigns from office;

(b) dies;

(c) becomes of unsound mind;

(d) becomes an undischarged bankrupt;

(e) is convicted of an offense involving fraud or dishonesty;

(f) is removed from office by the General Meeting;

(g) is disqualified from being a member of the Board of Directors by the Bank or Regulated Authority; or

(h) is absent from three consecutive meetings of the Board of Directors without reasonable cause.

Appointment and duties of the loan committee

26.-(1) Each SACCOS shall have a Loan Committee.

(2) The Loan Committee shall be appointed by the Board of Directors.

(3) The Loan Committee shall have the following duties-

(a) to review loan applications;

(b) to approve or reject loan applications;

(c) to monitor the repayment of loans;

(d) to report to the Board of Directors on the status of loans;

(e) to perform any other duties as prescribed by the Act or these Regulations.

Employment and duties of
SACCOS managers

27.-(1) Each SACCOS shall employ a manager.

(2) The manager shall be appointed by the Board of Directors.

(3) The manager shall have the following duties-

(a) to manage the daily operations of the SACCOS;

(b) to implement the strategic plan of the SACCOS;

(c) to ensure compliance with laws and regulations;

(d) to prepare the annual budget of the SACCOS;

(e) to prepare the annual accounts of the SACCOS;

(f) to report to the Board of Directors on the performance of the SACCOS;

(g) to ensure the adequacy of the SACCOS's internal control system;

(h) to ensure the adequacy of the SACCOS's risk management system; and

(i) to perform any other duties as prescribed by the Act or these Regulations.

PART FIVE
LENDING OPERATIONS

Lending policy

28.-(1) Each SACCOS shall have a lending policy.

(2) The lending policy shall include-

(a) the criteria for granting loans;

(b) the maximum amount of loans that can be granted;

(c) the interest rates and fees for loans;

(d) the collateral requirements for loans;

(e) the procedures for loan application and approval;

(f) the procedures for loan monitoring and recovery;

(g) the procedures for loan write-off;

(h) the procedures for handling non-performing loans; and

(i) any other information as prescribed by the Act or these Regulations.

(3) The lending policy shall be approved by the Board of Directors.

(4) The lending policy shall be reviewed at least once a year.

Loan applications

29.-(1) A person who wishes to obtain a loan from a SACCOS shall submit a loan application to the SACCOS.

(2) The loan application shall include-

(a) the name and address of the applicant;

(b) the purpose of the loan;

(c) the amount of the loan;

(d) the period for repayment of the loan;

(e) the collateral for the loan; and

(f) any other information as prescribed by the Act or these Regulations.

(3) The SACCOS shall acknowledge receipt of the loan application within seven days from the date of receiving the application.

Loan approval

30.-(1) The SACCOS shall approve or reject a loan application within thirty days from the date of receiving the complete application.

(2) If the SACCOS approves the loan application, it shall enter into a loan contract with the applicant.

(3) If the SACCOS rejects the loan application, it shall inform the applicant in writing of the reasons for the rejection within seven days from the date of the decision.

Loan contract

31.-(1) A loan contract shall be in writing.

(2) The loan contract shall include-

(a) the name and address of the borrower;

(b) the amount of the loan;

(c) the interest rate and fees for the loan;

(d) the period for repayment of the loan;

(e) the collateral for the loan;

(f) the rights and obligations of the borrower and the SACCOS; and

(g) any other information as prescribed by the Act or these Regulations.

(3) The loan contract shall be signed by the borrower and the SACCOS.

Submission of reasons for loan application rejection

32.-(1) If a SACCOS rejects a loan application, it shall submit the reasons for the rejection to the Bank or Regulated Authority within seven days from the date of the decision.

(2) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the rejection of the loan application.

Loan collateral

33.-(1) A SACCOS may require collateral for a loan.

(2) The collateral shall be valued by an independent valuer.

(3) The SACCOS shall ensure that the collateral is insured.

(4) The SACCOS shall ensure that the collateral is registered in its name.

Loan guarantee

34.-(1) A SACCOS may require a guarantee for a loan.

(2) The guarantor shall be a person who is solvent and has a good credit history.

(3) The guarantee shall be in writing.

(4) The guarantee shall be signed by the guarantor.

Transactions with related parties

35.-(1) A SACCOS shall not enter into transactions with related parties unless the transaction is on arm's length terms.

(2) A SACCOS shall disclose transactions with related parties to the Bank or Regulated Authority.

(3) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding transactions with related parties.

Setting interest rates, fees, and penalties

36.-(1) A SACCOS shall set interest rates, fees, and penalties for loans in accordance with the Act and these Regulations.

(2) The interest rates, fees, and penalties shall be disclosed to borrowers.

(3) The interest rates, fees, and penalties shall be reviewed at least once a year.

Early loan repayment

37.-(1) A borrower may repay a loan early.

(2) The SACCOS shall not charge a penalty for early repayment of a loan unless the loan contract specifies otherwise.

(3) The SACCOS shall credit the early repayment to the borrower's account.

Criteria and conditions for loan participation

38.-(1) A SACCOS may participate in loans with other SACCOS.

(2) The SACCOS shall ensure that the loan participation is on arm's length terms.

(3) The SACCOS shall disclose loan participation to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding loan participation.

Micro-loans

39.-(1) A SACCOS may provide micro-loans.

(2) The SACCOS shall ensure that the micro-loans are provided in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose micro-loans to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding micro-loans.

Classification of loan groups and loan portfolio

40.-(1) A SACCOS shall classify loan groups and loan portfolio in accordance with the Act and these Regulations.

(2) The SACCOS shall report loan groups and loan portfolio to the Bank or Regulated Authority.

(3) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding loan groups and loan portfolio.

Accumulation of interest on micro-loans

41.-(1) A SACCOS shall accumulate interest on micro-loans in accordance with the Act and these Regulations.

(2) The SACCOS shall report interest on micro-loans to the Bank or Regulated Authority.

(3) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding interest on micro-loans.

Adjustment of loan terms

42.-(1) A SACCOS may adjust the terms of a loan.

(2) The SACCOS shall ensure that the adjustment of loan terms is on arm's length terms.

(3) The SACCOS shall disclose adjustment of loan terms to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding adjustment of loan terms.

Loan write-off

43.-(1) A SACCOS may write off a loan.

(2) The SACCOS shall ensure that the write-off of a loan is in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose write-off of a loan to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding write-off of a loan.

PART SIX
LIQUIDITY, ASSET AND LIABILITY MANAGEMENT

Asset and liability management policy

44.-(1) Each SACCOS shall have an asset and liability management policy.

(2) The asset and liability management policy shall include-

(a) the objectives of asset and liability management;

(b) the strategies for asset and liability management;

(c) the procedures for asset and liability management;

(d) the roles and responsibilities of staff in asset and liability management; and

(e) any other information as prescribed by the Act or these Regulations.

(3) The asset and liability management policy shall be approved by the Board of Directors.

(4) The asset and liability management policy shall be reviewed at least once a year.

Liquidity contingency plan

45.-(1) Each SACCOS shall have a liquidity contingency plan.

(2) The liquidity contingency plan shall include-

(a) the objectives of the liquidity contingency plan;

(b) the strategies for the liquidity contingency plan;

(c) the procedures for the liquidity contingency plan;

(d) the roles and responsibilities of staff in the liquidity contingency plan; and

(e) any other information as prescribed by the Act or these Regulations.

(3) The liquidity contingency plan shall be approved by the Board of Directors.

(4) The liquidity contingency plan shall be reviewed at least once a year.

Minimum asset liquidity ratio

46.-(1) Each SACCOS shall maintain a minimum asset liquidity ratio of not less than ten percent.

(2) The Bank or Regulated Authority may require a SACCOS to maintain a higher minimum asset liquidity ratio if the SACCOS-

(a) has a high level of illiquid assets;

(b) has a high level of short-term liabilities; or

(c) has a high level of risk.

Deposits in banks

47.-(1) A SACCOS may deposit funds in banks.

(2) The SACCOS shall ensure that the deposits in banks are insured.

(3) The SACCOS shall report deposits in banks to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding deposits in banks.

Borrowing outside
SACCOS

48.-(1) A SACCOS may borrow from financial institutions.

(2) The SACCOS shall ensure that the borrowing is on arm's length terms.

(3) The SACCOS shall report borrowing to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding borrowing.

Investment policy

49.-(1) Each SACCOS shall have an investment policy.

(2) The investment policy shall include-

(a) the objectives of investment;

(b) the strategies for investment;

(c) the procedures for investment;

(d) the roles and responsibilities of staff in investment; and

(e) any other information as prescribed by the Act or these Regulations.

(3) The investment policy shall be approved by the Board of Directors.

(4) The investment policy shall be reviewed at least once a year.

Investment conditions

50.-(1) A SACCOS shall invest in accordance with the Act and these Regulations.

(2) The SACCOS shall ensure that the investments are insured.

(3) The SACCOS shall report investments to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding investments.

PART SEVEN
ACCOUNTING AND AUDIT

Accounting books, records, and financial year

51.-(1) Each SACCOS shall keep accounting books and records.

(2) The accounting books and records shall be kept in accordance with the Act and these Regulations.

(3) The financial year of a SACCOS shall be from January 1 to December 31.

(4) The SACCOS shall report accounting books and records to the Bank or Regulated Authority.

(5) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding accounting books and records.

Preparation and submission of accounts

52.-(1) Each SACCOS shall prepare annual accounts.

(2) The annual accounts shall be prepared in accordance with the Act and these Regulations.

(3) The annual accounts shall be submitted to the Bank or Regulated Authority within three months from the end of the financial year.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding annual accounts.

Disclosure of financial information

53.-(1) Each SACCOS shall disclose financial information.

(2) The financial information shall be disclosed in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose financial information to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding financial information.

Appointment of internal auditor

54.-(1) Each SACCOS shall appoint an internal auditor.

(2) The internal auditor shall be appointed by the Board of Directors.

(3) The internal auditor shall be a person who is independent of the SACCOS.

(4) The internal auditor shall report to the Board of Directors.

(5) The internal auditor shall report to the Bank or Regulated Authority.

Issuance of internal auditor report

55.-(1) The internal auditor shall issue an internal auditor report.

(2) The internal auditor report shall be issued in accordance with the Act and these Regulations.

(3) The internal auditor report shall be submitted to the Board of Directors.

(4) The internal auditor report shall be submitted to the Bank or Regulated Authority.

(5) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the internal auditor report.

Duties of internal auditor

56.-(1) The internal auditor shall have the following duties-

(a) to audit the accounting books and records of the SACCOS;

(b) to audit the financial statements of the SACCOS;

(c) to audit the internal control system of the SACCOS;

(d) to audit the risk management system of the SACCOS; and

(e) to perform any other duties as prescribed by the Act or these Regulations.

Internal audit plan

57.-(1) Each SACCOS shall have an internal audit plan.

(2) The internal audit plan shall include-

(a) the objectives of the internal audit;

(b) the strategies for the internal audit;

(c) the procedures for the internal audit;

(d) the roles and responsibilities of staff in the internal audit; and

(e) any other information as prescribed by the Act or these Regulations.

(3) The internal audit plan shall be approved by the Board of Directors.

(4) The internal audit plan shall be reviewed at least once a year.

Hiring internal auditor

58.-(1) A SACCOS may hire an internal auditor.

(2) The SACCOS shall ensure that the internal auditor is independent.

(3) The SACCOS shall report hiring of internal auditor to the Bank or Regulated Authority.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding hiring of internal auditor.

External audit

59.-(1) Each SACCOS shall have an external audit.

(2) The external audit shall be conducted by an external auditor.

(3) The external auditor shall be appointed by the General Meeting.

(4) The external auditor shall be a person who is independent of the SACCOS.

(5) The external auditor shall report to the General Meeting.

(6) The external auditor shall report to the Bank or Regulated Authority.

External auditor access to employees

60.-(1) The external auditor shall have access to employees of the SACCOS.

(2) The external auditor shall have access to all documents of the SACCOS.

(3) The external auditor shall have access to all information of the SACCOS.

Reporting to the
Bank or Regulated
Authority

61.-(1) The external auditor shall report to the Bank or Regulated Authority.

(2) The external auditor shall report any irregularities to the Bank or Regulated Authority.

(3) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the external auditor's report.

Submission of audit report to the Annual General Meeting

62.-(1) The external auditor shall submit the audit report to the Annual General Meeting.

(2) The audit report shall be submitted within three months from the end of the financial year.

(3) The Annual General Meeting shall approve the audit report.

Replacement of external auditor

63.-(1) The General Meeting may replace the external auditor.

(2) The replacement of the external auditor shall be approved by the Bank or Regulated Authority.

(3) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the replacement of the external auditor.

Term of external auditor

64.-(1) The term of the external auditor shall be four years.

(2) The external auditor may be reappointed for one additional term of four years.

(3) The external auditor shall not be reappointed for more than one additional term.

PART EIGHT
SUPERVISION AND CONTROL

Inspection of
SACCOS

65.-(1) The Bank or Regulated Authority may inspect a SACCOS.

(2) The inspection shall be conducted in accordance with the Act and these Regulations.

(3) The SACCOS shall cooperate with the inspection.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the inspection.

Investigation

66.-(1) The Bank or Regulated Authority may investigate a SACCOS.

(2) The investigation shall be conducted in accordance with the Act and these Regulations.

(3) The SACCOS shall cooperate with the investigation.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the investigation.

Submission of reports

67.-(1) Each SACCOS shall submit reports to the Bank or Regulated Authority.

(2) The reports shall be submitted in accordance with the Act and these Regulations.

(3) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the reports.

Joint supervision agreements

68.-(1) The Bank or Regulated Authority may enter into joint supervision agreements with other regulatory authorities.

(2) The joint supervision agreements shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall cooperate with the joint supervision agreements.

Issuance of prohibition and restriction orders

69.-(1) The Bank or Regulated Authority may issue prohibition and restriction orders.

(2) The prohibition and restriction orders shall be issued in accordance with the Act and these Regulations.

(3) The SACCOS shall comply with the prohibition and restriction orders.

Management and takeover of operations

70.-(1) The Bank or Regulated Authority may take over the management and operations of a SACCOS.

(2) The takeover shall be conducted in accordance with the Act and these Regulations.

(3) The SACCOS shall cooperate with the takeover.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the takeover.

Limit of supervision by the Bank or
Regulated Authority

71.-(1) The supervision by the Bank or Regulated Authority shall be limited to the purposes of the Act and these Regulations.

(2) The Bank or Regulated Authority shall not interfere with the management and operations of a SACCOS unless necessary for the purposes of the Act and these Regulations.

PART NINE
PROTECTION OF MEMBERS

Transparency conditions for shares, reserves, and deposits

72.-(1) Each SACCOS shall ensure transparency for shares, reserves, and deposits.

(2) The transparency shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose shares, reserves, and deposits to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding shares, reserves, and deposits.

Transparency for interest-bearing accounts

73.-(1) Each SACCOS shall ensure transparency for interest-bearing accounts.

(2) The transparency shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose interest-bearing accounts to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding interest-bearing accounts.

Transparency of additional information

74.-(1) Each SACCOS shall ensure transparency of additional information.

(2) The transparency shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose additional information to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding additional information.

Transparency of account term changes

75.-(1) Each SACCOS shall ensure transparency of account term changes.

(2) The transparency shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose account term changes to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding account term changes.

Transparency in loan issuance

76.-(1) Each SACCOS shall ensure transparency in loan issuance.

(2) The transparency shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose loan issuance to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding loan issuance.

Complaint and dispute resolution system

77.-(1) Each SACCOS shall have a complaint and dispute resolution system.

(2) The complaint and dispute resolution system shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose the complaint and dispute resolution system to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding the complaint and dispute resolution system.

Transparency for loan guarantors

78.-(1) Each SACCOS shall ensure transparency for loan guarantors.

(2) The transparency shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose loan guarantors to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding loan guarantors.

Loan collection or tracking

79.-(1) Each SACCOS shall collect or track loans.

(2) The collection or tracking shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose collection or tracking to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding collection or tracking.

Financial education

80.-(1) Each SACCOS shall provide financial education to members.

(2) The financial education shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose financial education to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding financial education.

Compliance with consumer protection laws

81.-(1) Each SACCOS shall comply with consumer protection laws.

(2) The compliance shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose compliance with consumer protection laws to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding compliance with consumer protection laws.

PART TEN
GENERAL CONDITIONS

Business development plan

82.-(1) Each SACCOS shall have a business development plan.

(2) The business development plan shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose business development plan to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding business development plan.

Submission of loan reports

83.-(1) Each SACCOS shall submit loan reports to the Bank or Regulated Authority.

(2) The loan reports shall be submitted in accordance with the Act and these Regulations.

(3) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding loan reports.

Approval for exchange of loan information

84.-(1) Each SACCOS shall obtain approval for exchange of loan information.

(2) The approval shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose approval for exchange of loan information to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding approval for exchange of loan information.

Administrative measures

85.-(1) The Bank or Regulated Authority may take administrative measures.

(2) The administrative measures shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall comply with administrative measures.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding administrative measures.

Upgrading SACCOS

86.-(1) A SACCOS may be upgraded.

(2) The upgrade shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose upgrade to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding upgrade.

Transitional period

87.-(1) There shall be a transitional period.

(2) The transitional period shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall comply with transitional period.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding transitional period.

Agreements between
SACCOS and employers

88.-(1) Each SACCOS may enter into agreements with employers.

(2) The agreements shall be in accordance with the Act and these Regulations.

(3) The SACCOS shall disclose agreements with employers to members.

(4) The Bank or Regulated Authority may require the SACCOS to provide additional information regarding agreements with employers.

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SCHEDULE

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