Licensing of micro-lenders doubles

The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) has managed to eradicate backlog in micro-lending applications with the number of licences issued doubling in the year to March 2015.

According to the regulatory authority’s 2015 annual report, the number of licensed micro-lenders increased to 166 in the review period from 73 registered in the prior year representing a 127 percent increase.

About 33 applications were withdrawn from the licensing process as some considered compliance to licensing requirements to be costly and burdensome.

Since the promulgation of the micro licensing regulations in 2012, the regulating authority had received 262 applications for licensing as micro-lenders under the provision of the NBFIRA Act and its supporting micro-lending regulations of March 2012.

“There were those who withdrew as they felt the business was no longer viable while about four licensed micro-lenders volunteered to suspend their licences until further notice due to high operational costs resulting in losses,” read part of the statement. In addition, the department also conducted 73 pre-licensing inspections. During the reporting period, about 42 applications of pawnshop operators, 10 finance and leasing companies under this dispensation were received.

Pawnshops, finance and leasing companies are exempted from licensing under the provision of section 48 of the NBFIRA Act pending promulgation of the relevant legislation. The authority also conducted site inspections prior to licensing entities to ascertain the correctness of information submitted and assessed the readiness of the applicant to commence operations.

“Therefore, during our inspections, an entity was required to submit monthly loan books, annual financial and statistical returns and annual financial statements to enable the regulatory authority to perform off-site monitoring.”

As of March 2015, the authority received 167 complaints from the public against micro-lenders and pawnshops. A majority of the complaints revolved around excessive interest rates, as was the case in the previous year, followed by complaints concerning over-deduction of repayment instalments.

About 40 percent of people complained about the excessive interest charges followed by 34 people who complained about over deduction of repayment instalments.  While eight people were concerned about the illegal collection method and about four said terms and conditions of the agreement were not explained.

Unlike the prior year, no one complained about retention of his or her bank cards or national identity cards. Total assets from top 20 micro-lenders increased by 7.6 percent primarily due to growth in loan book values.  Letshego financial services remained the largest entity with a market share of 60 percent of loan book value.  During the review period the total capital and reserves of top 20 micro lenders increased to P1.4 billion from P1 billion registered in the prior year.  The capital to assets ratios of micro lenders remained strong at 47.6 percent from 37.1 percent in the previous year. Moving forward, NBFIRA seeks to concentrate on the development of regulatory frameworks for the medical aid industry, finance and leasing companies.

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