Tuesday, January 19, 2021

Non Bank regulator to chew rules with unbridled micro lenders

The Non Bank Financial Institutions Regulatory Authority (NBFIRA) is moving closer to regulating the micro lenders after coming up with a set of draft rules that will keep an eye on the industry that has in the past played with the lives of thousands of Botswana.

Robert Hobart, the Chief Executive Officer for the body told Sunday Standard this week that currently there is no supervisory body and they “want to regulate and supervise them”.
“We want to make sure that there is fairness in the market,” said Hobart. The new set of rules is likely to lock-out a couple of players in the industry looking at high standard of requirements.

For example, the draft rules say players to be licensed will be of integrity and that full disclosure is provided to the clients.

Also, NBFIRA wants to see to it that there is a fair collection method, that a borrower is given sufficient information to make an informed decision. The lender will be expected to keep the information about the borrower confidential and that there shall be a dispute resolution mechanism.

Botswana micro lending sector is tainted with bad players, just like the real estate industry where unscrupulous companies cheat consumers of hard earned cash. No where in the world would a lender keep a borrower’s Identity Card and know their bank card details.

Hobart revealed that they are benchmarking their new rules on established regulators from South Africa that have track record and the newly set up regulator in Namibia.
The new proposed rules will be discussed at a workshop to be held on the 18th March at Fairgrounds Holding’s Boipuso Hall where the rules will be circulated.

This is the first consultation process undertaken by the body that will regulate all the financial institutions not covered by the Banking Act.

It is expected that after the workshop, NBFIRA will get people’s comments and go through them, although they will not agree with all of the suggestions from the industry and the public.
“We will then take them to the board which will approve them and then become a law,” he added.

Estimates say currently there are 125 micro lenders registered with Micro Lenders Association of Botswana and about 75 non members.

The set of rules is the first step taken by the NBFIRA to address public concerns from non regulated financial services institutions.

The move is running concurrently with other reviews for insurance industry and the one for capital markets.
Last year, Hobart told Sunday Standard that some of the laws in the financial services industry are ‘outdated’.
Some of the laws in line for review are Insurance Industry Act, The International Insurance Act, The Pension and Provident Funds Act, Botswana Stock Exchange Act, The Collective Investment Undertakings Act and Part XVI of the Income Act.

He said of the laws at the time: “Unfortunately, the other statutes, including the Pension and Provident Funds Act, are somewhat out of date and need revision. For example, the Pension and Provident Funds Act does not even contemplate the registration of a number of important participants in the pension industry.”

NBFIRA is the body passed by Parliament with the principal objective being to regulate and supervise non banking institutions so as to foster their safety and soundness, the highest standards of business conduct, fairness, efficiency and orderliness of the non bank financial sector and the stability of the financial system.

Among the key factors the authority will have to draw prudential rules to ensure that the currently less regulated sector does not cause mayhem in the financial market that can lead to the collapse of the economy.

The prudential rules will ensure that Botswana registered non bank financial institution work along the internationally accepted standards by ensuring that they are run by people with prudential skills, subscribe to good corporate governance, meet the set capital and liquidity requirements and use prescribed financial instruments and off balance sheet transactions among others.

The authority is given a wide range of powers, such as to carry surprise checks on the conduct of the non bank financial institutions.

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