The Tanzanian government has begun drafting a Microfinance Act that will provide a legal, regulatory and supervisory framework for microfinance operations, according to a statement attributed to Harry Ndambala, manager of the microfinance supervision department of the Bank of Tanzania, the central bank of the country. The sector is currently unregulated, and microfinance institutions (MFIs) have been accused of engaging in abusive practices.
In addition to implementing the Microfinance Act, Mr Ndambala also said that the government plans to launch a credit reference bureau by September 2012. A financial literacy education framework will also be put in place in an effort to ensure that clients understand the financial services they use. The Bank of Tanzania has also partnered with the World Bank Group, a financial institution that disburses loans to developing countries, to conduct a study on financial consumer protection in Tanzania addressing the banking, insurance, pensions, securities and microfinance sub – sectors.
The announcement was made at a meeting on the Small Entrepreneurs Loan Facility (SELF) II, a project that aims to alleviate poverty by increasing access credit for poor rural households in Tanzania. SELF I ran from 2000 to 2007, and SELF II began in 2011.
The 13 MFIs that report 2010 data to the US-based nonprofit Microfinance Information Exchange (MIX) held an aggregate gross loan portfolio of USD 63.7 million disbursed to approximately 222,000 borrowers.
By Charlotte Newman, Research Associate
About Bank of Tanzania
Created by government decree in 1992, the Bank of Tanzania (BoT) is charged with using monetary policy to create price stability. This is in contrast to the Bank of Tanzania Act of 1965 whereby the bank was given multiple mandates. In its efforts to achieve price stability, the bank formulates and implements monetary policy, by using instruments, such as refinancing policy, minimum reserve policy, open market policy and foreign exchange interventions.
About World Bank Group
The World Bank Group consists of five institutions, all of which are owned by its member countries. The Group’s mission is to improve living standards for people in the developing world. The World Bank Group encompasses the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); the International Centre for Settlement of Investment Disputes (ICSID) and the World Bank, which consists of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
Established in 1944, the World Bank was initially comprised of two development institutions, IBRD and IDA, which provide leveraged loans to developing countries for capital programs. IBRD makes loans and grants and provides analytical and advisory services to middle-income countries and poorer countries that are deemed creditworthy, with the aim of promoting sustainable development to reduce poverty. IDA offers interest-free credits and grants to the world’s 81 poorest countries, where a majority of the people lives on less than USD 2 per day. IDA resources and technical assistance support country-led poverty reduction strategies in the following policy areas: increased productivity, better governance and accountability, an improved private investment climate and access to education and healthcare.
Established in 1956, IFC was created to support financial private sector development, mobilize private capital and provide advisory and risk mitigation services to businesses and services in emerging markets. Unlike the World Bank, which finances projects with sovereign guarantees, the IFC finances projects without sovereign guarantees, which means that the IFC is primarily active in private sector projects.
Established in 1988, MIGA’s mission is to promote foreign direct investment (FDI) in developing countries to help support economic growth, reduce poverty and improve people’s lives. It does this by providing political risk insurance (guarantees) to the private sector.
Established in 1966, ICSID facilitates the settlement of investment disputes between governments and private foreign investors through conciliation and arbitration. Its aim is to foster an atmosphere of mutual confidence between states and investors in order to promote increased flows of international investment. ICSID is an autonomous international organization. However, ICSID’s Administrative Council is chaired by the World Bank Group’s President.
Also housed in the World Bank is the Consultative Group to Assist the Poor (CGAP), an independent policy and research center guided by the aim to promote financial access for the world’s poor. The World Bank was one of the founding donors of CGAP in 1995.
Sources and Additional Resources:
Daily News: “Microfinance Act in the Offing,” http://dailynews.co.tz/index.php/biz/2212-microfinance-act-in-the-offing
MicroCapital.org story, January 27, 2012, “MICROCAPITAL BRIEF: MFTransparency Releases Microloan Pricing Data for Ghana, Zambia, Tanzania,” https://www.microcapital.org/microcapital-brief-mftransparency-releases-microloan-pricing-data-for-ghana-zambia-tanzania/
MicroCapital.org story, January 10, 2012, “MICROCAPITAL BRIEF: 48 Tanzanian Microfinance Institutions Adopt Code of Conduct Covering Transparency, Client Protection,” https://www.microcapital.org/microcapital-brief-48-tanzanian-microfinance-institutions-adopt-code-of-conduct-covering-transparency-client-protection/
MicroCapital Universe Profile: Bank of Tanzania
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bank+of+Tanzania
MicroCapital Universe Profile: World Bank Group
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+World+Bank+Group
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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