Regulation (NAP) - Licensing and Exercise of Microfinance Activities

NAP
PERMANENT APPLICATION REGULATION
PROPOSER(S) ENTRY INTO FORCE ISSUE DATE DOC NO. PAGE 1/22 C.A.
Subject: Licensing and exercise of microfinance activities Whereas the importance of microfinance as an instrument that promotes improved living conditions for the population, fostering human development by enabling low-income populations without access to traditional financial services to achieve self-sufficiency; Whereas further that the development of a duly regulated microfinance industry can reconcile two perspectives: providing citizens with various financial services, including socially-oriented loans, savings, and insurance, and encouraging investment in an economically viable sector with the capacity to become sustainable; Whereas there is a need to regulate certain legal instruments arising from Law 16/2018 of September 3, which approves the Legal Regime for Microfinance (hereinafter "RJM"), particularly regarding the authorization and operation of microfinance institutions; In these terms, the Central Bank of São Tomé and Príncipe, exercising the powers conferred upon it by letters d) and e) of Article 8 of its Organic Law, in conjunction with Articles 7 and paragraph 2 of Article 26 of Law 16/2018 of September 3, determines the following:

CHAPTER I
GENERAL PROVISIONS

Article 1.
(Object)
This NAP establishes the licensing and exercise requirements for microfinance activities provided for in the RJM.

Article 2.
(Definitions)

1. For the purposes of this regulation, the following shall be understood as:
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PERMANENT APPLICATION REGULATION
PROPOSER(S) ENTRY INTO FORCE ISSUE DATE DOC NO. PAGE 2/22 C.A. a) Monitoring - the follow-up, by the Central Bank of São Tomé and Príncipe (BCSTP) or another entity acting on its behalf, of the provision of financial services by qualified operators who are not Category A and B microfinance institutions as provided in Article 2 of this regulation, focused on receiving information of a general nature and at normally extended intervals regarding the financial services they provide, particularly for statistical purposes to monitor their financial activity; b) Prudential supervision - that which focuses on the inspection and follow-up by the BCSTP of compliance with prudential standards, particularly regarding solvency ratios, mandatory reserves, and risk limits, among other ratios, limits, and prudential practices, specifically aiming to protect the financial system as a whole and ensure the safety of public funds deposited in each institution; c) Conduct supervision - that which focuses on the inspection and follow-up by the BCSTP of compliance with standards concerning the relationship between financial institutions and their clients, aiming to guarantee transparency and regularity in market operations, institutions, and systems, as well as consumer protection; d) BCSTP — Central Bank of São Tomé and Príncipe.
2. Without prejudice to the preceding paragraph, terms used in this legal regime shall have the definitions attributed to them by the RJM.

Article 3.
(Special Registration)

1. Entities exercising microfinance activities are subject to special registration with the BCSTP, which covers:
   a) The name; b) The object/purpose; c) The date and form of incorporation; d) The publication date of the Articles of Association in the Official Gazette (Diário da República); e) The registered office; Dados de Revogação:
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PERMANENT APPLICATION REGULATION S.I. rz s-RIG. 1 ' e PROPONENTE (S) C.A. ENTRADA EM VIGOR DATA EMISSAO N° DOC FL 3/22 26/06/2019 26/06/2019 07/2019 f) The location and date of creation of branches or agencies, where applicable; g) The identification of members of the governing bodies; h) Changes occurring in the elements referred to in the preceding letters.
2. Amendments related to special registration elements are subject to prior authorization by the BCSTP.
3. Amendment requests are submitted via application delivered to the BCSTP, accompanied by a draft containing the proposed amendments to the Articles of Association.
4. The decision must be made within 30 (thirty) days from the date of receipt of the request.
5. The endorsement of amendments related to elements covered by special registration must be completed within 15 (fifteen) days from the date they occur.
6. The BCSTP may charge fees and charges for registration, endorsements, and issuance of certificates as established by specific legislation.

Article 4.
(Category of Microfinance Institutions)
For the purposes of this NAP, MFIs are classified into the following categories according to the nature of operations they are authorized to conduct:
a) Category A: MFIs that grant credit, provide other financial services to the general public, and in the case of microbanks, capture public deposits; b) Category B: MFIs that only capture deposits exclusively from their members or associates, grant credit, and provide other financial services on behalf of the same. Vistos Dados de Revogação:

NAP
PERMANENT APPLICATION REGULATION
PROPOSER(S) ENTRY INTO FORCE ISSUE DATE DOC NO. PAGE 4/22 C.A.
Article 5.
(Category A)
Category A MFIs include microbanks, microinsurance companies, and microcredit finance societies as defined under the RJM.

Article 6.
(Category B)
Category B MFIs include savings and credit associations, and cooperatives as defined under the RJM.

Article 7.
(Corporate Form)

1. Category A MFIs established within the national territory may adopt any corporate form provided by the prevailing Commercial Law.
2. Category B MFIs must be constituted as associations, except cooperatives which follow a specific regime.

Article 8.
(Share Capital)

1. The minimum share capital for the establishment of a microbank is Dobra 24,500,000.00.
2. The minimum share capital for exercising microfinance activities in Category B is Dobra 1,225,000.00.
3. The minimum share capital for a microcredit finance society is Dobra 6,125,000.00.
4. In cases of modification of purpose, merger, or spin-off, the provisions in the preceding paragraphs apply to the resulting institution from the modification or merger and to each resulting institution from a spin-off.
5. Partners or shareholders of microbanks may not hold more than 25% of the institution's share capital.
6. The net worth of authorized MFIs must always be equal to or greater than the minimum authorized capital.
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PERMANENT APPLICATION REGULATION
PROPOSER(S) ENTRY INTO FORCE ISSUE DATE DOC NO. PAGE 5/22 C.A.
CHAPTER II
AUTHORIZATION AND REGISTRATION
Seccao I
Authorization and registration regime applicable to Category A institutions

Article 9.
(Prior Authorization)

1. The establishment of Category A MFIs depends on prior authorization by the BCSTP.
2. The establishment of microinsurance companies applies, with due adaptations, the provisions regarding microbanks and others established in special regulation issued by the BCSTP.

Article 10.
(Authorization for Establishment)

1. Without prejudice to Article 10 of the RJM, the application submitted to the BCSTP must be accompanied by the following elements:
   a) Characterization of the type of institution to be established and a reasoned statement on the adequacy of the shareholder structure for its stability; b) Business plan, geographical location, organizational structure, human, technical, and material resources to be used, as well as financial projections for the first 3 (three) years of activity; c) Draft Articles of Association of the company; d) Personal identification and professional curriculum of founding partners or shareholders, specifying the capital subscribed by each, as well as proposed administrators, directors, or managers; e) Document proving the origin of funds used in the subscription of share capital ; f) Updated criminal record certificate of the persons referred to in letter d); 26/06/2019 26/06/2019 07/2019 Vistos Dados de Revogação:

NAP
PERMANENT APPLICATION REGULATION
PROPOSER(S) ENTRY INTO FORCE ISSUE DATE DOC NO. PAGE 6/22 C.A. g) Certificate of suitability issued by a competent entity in the country or area of professional activity of the persons referred to in letter d); h) Proof/negative certificate of debt, regarding credit within the system as well as tax and social security matters for the persons referred to in letter d).
2. The following information regarding founding shareholders that are legal entities holding qualified participations in the MFI to be established must also be submitted:
a) Articles of Association and list of administrative body members; b) Balance sheet and income statement for the last 3 (three) financial years; c) List of partners in the participating legal entity who hold qualified participations; d) List of companies in whose capital the participating legal entity holds qualified participations, along with an illustrative statement of the group structure to which it belongs; e) Verification of the identity of effective beneficiaries of qualified participants that are legal entities.
3. Applicants must appoint an attorney with domicile in São Tomé and Príncipe with full powers to represent them before the country's authorities, as well as receive and sign correspondence and notifications.
4. The BCSTP may request complementary information from applicants and conduct investigations it deems necessary, particularly regarding suitability, experience, or competence, as well as the origin of funds to be allocated to the institution.

Article 11.
(Processing Fee)
Concurrently with the establishment request, payment of the processing fee is required, in the amount corresponding to:
a) Dobra 245,000.00 for the establishment of microbanks; 26/06/2019 26/06/2019 07/2019 Vistos Dados de Revogação:

NAP
PERMANENT APPLICATION REGULATION
PROPOSER(S) ENTRY INTO FORCE ISSUE DATE DOC NO. PAGE 7/22 C.A. b) Dobra 25,000.00 for the establishment of microcredit finance societies; c) Dobra 1,000.00 for the establishment of Category B MFIs.

Article 12.
(Capital Deposit)

1. The minimum share capital required for the operation of Category A MFIs must be deposited by founding partners or shareholders with the BCSTP or in an account designated by it, no later than fifteen (15) business days after the issuance of the preliminary authorization for establishment.
2. Failure to timely comply with the preceding paragraph implies annulment of the request.

Article 13.
(Preliminary Decision)

1. The decision on the establishment authorization request must be taken and communicated in writing to applicants within a maximum period of 60 (sixty) days from receipt of the request or complementary information, where applicable.
2. The request shall be denied whenever:
   a) It is not accompanied by all required information and documents; b) Its processing is affected by inaccuracies or falsehoods; c) The institution does not meet the legal requirements for its establishment; d) The institution lacks sufficient technical means and financial resources for the type and volume of operations it intends to conduct; e) There are well-founded doubts or reasonable suspicions regarding the suitability, experience, or competence of the applicants, or regarding the legality and origin of funds to be allocated to the activity.
3. In case of denial, if it deems necessary to reserve confidentiality of sources and secrecy, the BCSTP may refrain from specifically communicating the reasons for refusal, provided that a general invocation of applicable legal provisions suffices.
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4. Notwithstanding the fulfillment of formal requirements, the authorization request may still be denied if an analysis of the specific market situation where the entity intends to be established discourages the emergence of another operator of the required species.

Article 14.
(Preliminary and Definitive Authorization)

1. On the date of approval of the request referred to in Article 10 of this NAP, the BCSTP issues a preliminary authorization, which obligates founding partners or shareholders to adopt necessary measures to convert it into a definitive one.
2. The requirements for obtaining definitive authorization for operation and commencement of activities are:
   a) Establishment of the company; b) Opening of accounts with the BCSTP and other legal formalities; c) Recruitment, training, and staff development; d) Leasing or acquisition of equipment and operational systems to be adopted by the MFI, including for risk measurement and control, internal audit, and internal controls; e) Leasing or acquisition of facilities or premises intended for MFI use in its operations; f) Engagement of an independent external auditor; g) Other specific requirements described in the preliminary authorization.
3. Operation authorization is also conditioned by an inspection conducted by the BCSTP at the premises where the institution will operate.
4. The deadlines for fulfilling the requirements referred to in the preceding paragraph are those set forth in Article 12 of the RJM.
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NAP PERMANENT APPLICATION REGULATION PROPONENTE (S) C.A. ENTRADA EM VIGOR DATA EMISSAO N° DOC FL 9/22 26/06/2019 26/06/2019 07/2019 Seccao II Authorization and registration regime applicable to Category B institutions and NGOs, Associations, or Foundations

Article 15.
(Authorization and Registration)
The exercise of activities by Category B MFIs, as well as NGOs, Associations, or Foundations, depends on prior authorization by the BCSTP and is subject to registration.

Article 16.
(Processing of Request)
Without prejudice to Article 10 of the RJM, the application submitted to the BCSTP must be accompanied by the following elements:
a) Characterization of the type of institution and brief description of the activity to be developed; b) Activity plan, description of geographical location, organizational structure, human, technical, and material resources to be used; c) Constitutive document; d) Personal identification and professional curriculum of management personnel; e) Document proving the origin of funds used in capital subscription; f) Updated criminal record certificate of management personnel; g) Proof/negative certificate of debt, regarding credit within the system as well as tax and social security matters for the applicant and management personnel.

Article 17.
(Decision)

1. The decision on the request must be taken and communicated in writing to applicants within a maximum period of 90 (ninety) days from receipt of the request or complementary information, where applicable.
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2. The request shall be denied whenever:
a) It is not accompanied by all required information and documents; b) Its processing is affected by inaccuracies or falsehoods; c) The institution lacks sufficient technical means and financial resources for the type and volume of operations it intends to conduct; d) There are well-founded doubts or reasonable suspicions regarding the legality and origin of funds to be allocated to the activity.
3. In case of denial, if it deems necessary to reserve confidentiality of sources and secrecy, the BCSTP may refrain from specifically communicating the reasons for refusal.
4. Notwithstanding the fulfillment of formal requirements, the authorization request may still be denied if an analysis of the specific market situation where the entity intends to be established discourages the emergence of another operator of the required species.
Seccao III
Entities subject only to registration

Article 18.
(Registration of other entities)

1. Self-managed savings boxes, and state bodies, such as Agencies, Enterprises, and Local Government that intend to grant microcredit within a specific project for economically vulnerable populations, must register their respective projects with the BCSTP within 30 days after commencing activity.
2. The registration request must be accompanied by the following information:
   a) Activity program, geographical location, organizational structure, and human, technical, and material resources to be used; b) Constitutive document, whose purpose should not have the provision of microfinance services as its main activity; c) Personal identification and professional curriculum of management personnel; 26/06/2019 26/06/2019 07/2019 Vistos Dados de Revogação:

NAP PERMANENT APPLICATION REGULATION PROPONENTE (S) C.A. ENTRADA EM VIGOR DATA EMISSAO N° DOC FL 11/22 26/06/2019 26/06/2019 07/2019 d) Document proving the origin of funds used in the activity; e) Updated criminal record certificate of management personnel. f) Proof/negative certificate of debt, regarding credit within the system as well as tax and social security matters for the applicant and management personnel.
3. Applicants must appoint an attorney with domicile in São Tomé and Príncipe with full powers to represent them before the country's authorities, as well as receive and sign correspondence and notifications.
4. The BCSTP may request complementary information from applicants and conduct investigations it deems necessary, particularly regarding the origin of funds used for microcredit granting activities, as well as the suitability, experience, or competence of proposed administrators/managers.

Article 19.
(Cessation of Activity)
Entities provided for in this Section must notify the BCSTP when they intend to cease or have ceased their microcredit activity.

CHAPTER II DISPOSIÇÕES COMUNS APLICÁVEIS A TODAS AS CATEGORIAS DE INSTITUIÇÕES DE MICROFINANÇAS
Suck, I Disposições gerais

Article 20.
(Expiration of Authorization)
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1. The operating authorization expires if the applicant does not commence activity within a maximum period of 90 days from the date of its grant.
2. The aforementioned deadline may be extended by the BCSTP for an additional 60 days, upon a reasoned request from the applicant entity.

Article 21.
(Revocation of Authorization)

1. Without prejudice to other applicable legal provisions, the authorization may be revoked if any of the following situations occur:
   a) It was obtained through false declarations or other illicit means; b) The appointment of management members is refused due to lack of suitability; c) Serious infractions occur in the development of activities, accounting organization, or internal audit of the institution; d) The institution does not guarantee compliance with its obligations to creditors, particularly regarding the safety of funds entrusted to it, where applicable; e) The institution fails to comply with laws, regulations, and instructions governing its activity.
2. The fact provided for in letter b) of the preceding paragraph does not constitute grounds for revocation if, within a deadline established by the BCSTP, the institution appoints another management member whose registration is accepted.
3. The revocation decision must be reasoned and communicated to the institution within 30 (thirty) days from the date it is taken.
4. An appeal against a decision revoking the authorization may be filed, in accordance with the law.
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Article 22.
(Commencement of Activity)
MFIs, as well as the members of their governing bodies, may not commence their respective activities until they are registered in the BCSTP's special register.

Article 23.
(Disqualifications)
Any person who lacks suitability is disqualified from being a founder or member of the governing bodies of any MFI, or representing it in any capacity, particularly if convicted of economic or financial crimes, or if they have directed a company or institution that was subject to bankruptcy or judicial liquidation proceedings with a final judgment, or if they have been convicted in administrative sanction proceedings before the BCSTP.

Article 24.
(Publicity of Applicable Conditions)
MFIs must make the conditions applicable to their credit operations known to the public through the most expedient means and via mass media, as well as by posting them at the entrance of their operating premises, particularly regarding commissions, administrative expenses, and other charges borne by the microcredit beneficiary.

CHAPTER III CORPORATE GOVERNANCE SYSTEM SECC "AO I (Rules applicable to Category A MFIs)

Article 25.
(Composition of the Administrative Body)
Dados de Revogação: 26/06/2019 26/06/2019 07/2019 NAP PERMANENT APPLICATION REGULATION PROPONENTE (S) C.A. ENTRADA EM VIGOR DATA EMISSAO N° DOC FL 14/22 26/06/2019 26/06/2019 07/2019

1. The composition of the MFI's administrative body shall be determined according to the complexity of the institution, as well as the nature and scope of its activities.
2. Members of the Administrative Body must not be influenced by third parties in exercising their functions and powers, particularly executive directors or principal shareholders/partners, to ensure decisions are made independently considering the best interests of the MFI.

Article 26.
(Requirements)

1. Members of the Administrative Body must meet the requirements established by prevailing BCSTP regulations, as well as high standards of conduct and other rules established by shareholders/partners.
2. For the purposes of the preceding paragraph, the MFI must approve formal policies and rigorous procedures for the selection, appointment, or reappointment process of Administrative Body members.
3. The aforementioned selection policies must include a description of the education, experience, and qualifications necessary to ensure sufficient technical competence.
4. The candidate for the position must be selected based on prior experience, academic education, technical capacity, evidence of integrity, good track record, and other factors deemed relevant to the selection process.
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