Micro-lenders battle with compliance

Keikantse Lesemela | Wednesday January 29, 2014 15:15

 

The regulatory authority has received 214 micro-lending applications for licensing to date and as at January 7, 2014. It has issued 52 licences, highlighting the level of delinquency in the industry.

The massive non-compliance in the sector is due to the fear and or lack of understanding of regulations, a development that exposes customers to unscrupulous lenders. It is estimated that close to a thousand micro-lenders were operating in Botswana before the gazzetting of the regulations in March 2012. He explained that the authority is carrying out pre-licencing inspections on those who have applied for licencing. The inspection has revealed that most of the applicants are not compliant with the regulations. “Micro-lenders with identified deficiencies have been issued with management letters to rectify the deficiencies and only three have been shut down,” said Kwapa.

He explained that they rely on on-site inspections and whistle-blowing to monitor the activities of micro-lenders. “We have also embarked on industry meetings with registered micro-lenders to discuss any issues that we may find not of good conduct or share any regulatory developments with them,” he said. NBFIRA is currently working with the police in investigations and shuts down entities operating illegally.

The authority conducts a pre-licencing inspection after a review following an application. The authority has conducted pre-licencing inspections of some micro-lenders in Maun, Francistown, Selibe-Phikwe, Jwaneng, Lobatse and Moshupa.

Pre-licencing inspection is to ensure that the micro-lenders’ operations are aligned to regulations and encourage professionalism in the industry. The NBFIRA annual report for 2012 states that the findings of the inspections carried out revealed that the majority of the micro- lenders are still not conversant with the regulations. This has resulted in many deficiencies in their operations. “Management letters were sent to those micro-lenders who during the pre-licencing inspections were found to be lacking in their operations as required by the Micro Lending Regulations, 2012. A licence is only issued after such deficiencies have been corrected,” reads the report.

The micro-lenders are expected to pay a once-off licence fee of P5,000 to the regulator for five years. The legislation stipulates that the borrower should be furnished with a detailed statement, showing how the money borrowed would attract interest. If such comprehensive paper work is not availed to the borrower, the regulations say the agreement would be null and void.  They bar investors with previous records of insolvency, fraud or serious criminal records in their countries of origin from operating cash loans in Botswana. Cash loan operators are required to carry out their businesses with integrity.