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Microfinance Companies and Microcredit Activities Regulations 2004
Directive applicable to financial institutions licensed as Microfinance Companies
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This document provides the regulations for microfinance companies and microcredit activities under the Banking and Financial Institutions Act of Tanzania. It states that credit risk is:
- The major cause of serious problems in a bank or a financial institution;
- Often directly related to lax credit standards for clients, lack of qualified lending expertise and poor portfolio management.
The provisions of the regulation state:
- Microfinance companies shall be incorporated as companies limited by shares, with a minimum core capital of Tshs. 800,000,000 in the case of microfinance companies with nation-wide branches and a minimum capital of Tshs. 200,000,000 in the case of unit microfinance companies;
- Microfinance companies shall, at all times, maintain core capital and total capital at not less than 10% and 15% respectively of its total risk weighted assets and off balance sheet exposure;
- Institutions engaged in granting individual microcredits shall conduct an appraisal of the character, payment history and payment capacity of each client;
- For the purposes of the computation of capital adequacy ratio, microcredits shall have a 100% weighting.
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