Starting a microfinance institution in Zambia can be a rewarding endeavor. It allows you to serve the financial needs of communities while operating under the oversight of the Bank of Zambia. This guide shows you how to apply for a microfinance license in Zambia, step by step.
Understanding the Types of Microfinance Licenses
The Bank of Zambia regulates two categories of microfinance licenses under the Banking and Financial Services Act. Each category has specific requirements and operating scopes.
1. Deposit-Taking Microfinance Institutions
These institutions can provide credit facilities, savings, linkage banking, and local money transfer services. They follow stricter regulations because they handle public deposits.
2. Non-Deposit Taking Microfinance Institutions
Non-deposit taking MFIs focus solely on providing credit facilities. They have fewer regulatory hurdles but also face limitations in their scope of operations.
Preliminary Steps Before Applying
Preparation is crucial before you submit your formal application. Completing the steps below ensures a smoother process when you start applying for a microfinance license in Zambia.
Name Clearance
Write to the Registrar of Financial Institutions and Financial Businesses at the Bank of Zambia. Request clearance for your proposed institution name. This step prevents conflicts with existing financial institutions.
Business Registration
Incorporate your company under Zambian law before proceeding. Keep your Certificate of Incorporation and Articles of Association accessible, as they form part of the application package.
Application Requirements and Documentation
Essential Forms
- Completed application form (Form MFI): This includes details about your institution, contact information, and the type of license you seek.
- Directors and Officers Questionnaire: Each board member and key executive must fill out this document.
- Vital Statistics Form: Key personnel should complete this form to provide detailed identification.
Required Supporting Documents
Company Documentation
- Certificate of Incorporation and Articles of Association
- Proof of physical and postal address of the head office
- Details of any branches (if applicable)
Capital Evidence
- Proof of minimum capital requirements
- K2,500,000 for deposit-taking MFIs
- K100,000 for non-deposit taking MFIs
- Bank statements and an auditor’s written assurance confirming your paid-up capital
- Disclosure of the source of initial capital and future funding
Business Planning
- Business plan with financial projections for at least three years
- Projected balance sheet and income statement with clearly stated assumptions
- Proposed accounting policies
Personnel Documentation
- Certified copies of identity documents (National Registration Cards or Passports)
- Certified copies of academic and professional qualifications
- Curriculum vitae for all directors and senior management
- Interpol Clearance certificates if any key personnel are foreigners
Other Requirements
- Name and address of proposed auditors (requires Bank of Zambia approval)
- Name and address of the institution’s bankers
Submitting the Application
Submission and Review
Compile all forms and supporting documents. Submit them to the Registrar at the Bank of Zambia along with the non-refundable application fee:
- K5,400 for deposit-taking MFIs
- K1,000 for non-deposit taking MFIs
Include security screening fees for directors and key executives. Amounts vary depending on their residency status, but commonly range from K84 to K795 per individual.
Application Review Timeline
The Bank of Zambia evaluates complete applications within 180 days. During this period, the Registrar may request additional information or clarifications.
Decision and Appeals
If the application meets all requirements, the Registrar approves it and issues a license upon payment of the annual license fee. If rejected, you can:
- Make written representations to the Registrar.
- If still rejected, appeal to the Minister of Finance within seven days. A three-person Tribunal will review the appeal, and its decision is final except on points of law.
Premises Requirements
Before the Bank of Zambia issues a final license, you must secure premises that meet specific standards:
- Lease agreement or Certificate of Title for the property
- Location that serves your target clientele
- Proper office setup for business operations
- Clearly displayed institution name
- Reliable communication facilities (telephone, fax, email)
- Safe(s) for secure storage
- Security measures like electronic alarms and security guards
The Bank of Zambia will inspect these premises to ensure compliance.
Minimum Capital Requirements
Minimum Capital Requirements
- K2,500,000 for deposit-taking MFIs
- K100,000 for non-deposit taking MFIs
Post-License Regulatory Obligations
After you receive a microfinance license in Zambia, you must adhere to ongoing obligations that maintain trust and stability in the financial system.
- Display the license in a visible place at your head office and all branches.
- Submit to regular inspections (both on-site and off-site) by the Bank of Zambia.
- File monthly prudential returns as required.
- Obtain prior approval from the Bank of Zambia for significant changes such as:
- Closing any branch
- Changing shareholders, directors, or senior managers
- Changing the institution’s name
- Comply with sections 23 and 24 of the Banking and Financial Services Act.
- Appoint a Compliance Officer to ensure your institution follows:
- The Banking and Financial Services Act
- The Prohibition and Prevention of Money Laundering Act
- Other relevant legislation
- Develop and implement internal anti-money laundering policies and training programs for staff.
Conclusion
Knowing how to apply for a microfinance license in Zambia can help you navigate a process that is both detailed and highly regulated. You must handle name clearance, fulfill capital requirements, and provide thorough business plans. By meeting these prerequisites, you can position your future microfinance institution for success under the guidance of the Bank of Zambia.
For more information, contact the Registrar of Banks, Financial Institutions & Financial Businesses at the Bank of Zambia, 7th Floor, Executive Building, Bank Square, Cairo Road, P.O. Box 30080, Lusaka, Zambia 10101; Telephone: +260 1 226844; Fax: +260 1 237070.
