10 June 2014

Tanzania: Law to Govern Microfinance Services in Pipeline

Dodoma — A MICRO FINANCE Act to regulate micro finance services in the country is in the offing, the National Assembly was told.

Deputy Finance Minister Mwigulu Nchemba said the government had since 2013 engaged a consultant from the Economic and Social Research Foundation (ESRF) to review the country's national micro finance policy of 2000 and propose changes with a view to coming up with a comprehensive policy that would take into account all changes in the industry.

A preliminary report by the consultant was ready and had identified specific areas such as achievements, coverage, weaknesses and challenges to focus on, said the deputy minister.

Mr Nchemba was responding to a question posed by Assumpter Mshama (Nkenge -CCM), who sought to know whether the government was ready to support village community banks (VICOBA), as it did with savings and credits cooperatives (SACCOS).

The deputy minister said owing to the great importance that the government attached to financial services in rural areas, efforts had been made including drafting of the microfinance policy of 2000 and the small entrepreneurship policy of 2002, with a view to putting in place a conducive environment for the sector's management.

As a result of the government efforts, Mr Nchemba said, there had been an increase in microfinancial institutions, including Vicoba, which provide services informally in rural and urban areas without being regulated.

"But, despite existence of the institutions and their offering services to people who would otherwise remain excluded, their small scale and level of their services remain a great challenge," said Mr Nchemba.

The country's microfinance services are divided into formal, semi-formal and informal. Meanwhile, the government said that it had no control over where commercial banks should expand their services, saying banking operations were market-oriented.

"It is upon the banks themselves to decide where to operate subject to market and business availability," Deputy Minister for Finance Adam Malima said.

He was responding to a question by Hussein Nassor Amar (Nyang'hwale -CCM) who wanted the government to take banking services closer to businesspeople, employees, farmers and livestock keepers in his constituency.

Mr Malima said the government's role was to create a friendly environment to enable the private sector invest in various areas, saying the banking industry had since the 1991 financial service reforms been operating competitively.

"It is therefore obvious that establishment of any bank branch is subject to the outcome of feasibility studies to determine returns on investment," said Mr Malima, noting, however, that the government always encouraged commercial banks to take their services closer to 'wananchi.'

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