New Bill tabled to regulate microcredit companies

New Bill tabled to regulate microcredit companies

Saturday, January 16, 2021

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THE Consumer Affairs Commission (CAC) has been identified as the body which will be responsible for dealing with complaints against microcredit institutions, under a new Microcredit Bill, tabled in the House of Representatives on Tuesday.

According to the Bill, the CAC will become the body responsible for not only accepting complaints against the institutions, but will also investigate complaints against them and formulate a code of conduct for the institutions on consumer-related matters.

However, there have been complaints by the microcredit institutions over the years, that while the CAC can accept complaints and investigate them, they are concerned about the commission formulating a code of conduct for them on consumer-related matters. The CAC falls under the Ministry of Industry, Commerce, Agriculture and Fisheries, under which the microcredit institutions also operate. However, it is the duty of the Ministry of Finance to regulate such institutions.

The Bill's Memorandum of Objects and Reasons noted that over the last two decades, there has been a proliferation of privately-owned money lending institutions, “which have sought to satisfy the demand for funding of micro, small and medium-sized enterprises”.

“The Government appreciates the importance of these institutions, as having access to financing is critical to alleviating poverty and facilitating growth in the economy. However, the significant increase in these institutions has presented challenges to conventional regulation, especially due to their lending modalities which do not easily fit into existing legal and company structures,” it stated.

“Also there has been a steady increase in requests from these institutions for exemptions from the provisions of the Moneylending Act, which provides some protection and recourse for borrowers,” it also noted.

It says, too, that, over time, issues have emerged which have led to the recognition that there is a need for the introduction of a regime to regulate privately-owned money lending institutions (microcredit institutions) which provide funding for micro, small and medium-sized enterprises.

It says that the Bill not only recognises the need to protect consumers by bringing order to the operations of microcredit institutions, but also recognises the need to ensure that they are not used to facilitate money laundering and terrorism.

The Bill, therefore, seeks to regulate persons who provide microcredit services, ensuring that such persons are licensed by regulatory authority, and required to keep proper accounting and other records and make reports to the regulatory authority on a regular basis, the memorandum says.

– Balford Henry

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