Monday, May 20, 2024

Small sparks fly as regulator meets micro lenders

Normally, when you try to introduce a regulation to a bunch of people who were previously unbridled, it takes some nerve to convince them.

This came to light this week when the Non Bank Financial Institutions Regulatory Authority (NBFIRA) officials gathered micro lenders from around the country to discuss a document containing a set of proposed rules that will keep the industry in check.

The discussions for a document titled ‘Proposed Rules of Business Operation for Micro Lenders’ attracted over 100 players in the industry to come and chew the proposals at Boipuso Hall.

Hearing from the discussions, the industry is suspicious of the authority although some of them said the regulations are a welcome development if they do not become a barrier to entry into the market.

Apart from one participant describing ‘NBFIRA’ as not sexy enough as an acronym, in the likes of ‘FSB’, a South African regulatory authority, lenders were concerned about the collection methods and rate of interest.

“It has proved very difficult for customers to come to the office and make their payments,” said one, who thought taking someone’s ATM card is a better collection method amongst other methods, like post dated cheques, deductions and trust.

Most of Botswana micro lenders, especially those of the small scale, have a tendency of taking clients identity cards (ID) and ATM cards so that they withdraw the money at the end of the month.

“We are all aware that a culture of paying is a challenge,” added one. Some lenders were concerned that auditors’ fees will paralise small operators as small ones will not afford them.

However, NBFIRA has not proposed any interest on the money borrowed, but it has suggested to the industry that ‘no lender shall levy a total charge of credit rate of more than 4 times the prime interest prevailing in Botswana ‘.
Andre Swanepoel, the consultant engaged by the body to help draw rules, has allayed fears that NBFIRA is out there to lock the players out.

“We are committed to cost effective supervision,” said Swanepoel. “We do not want to burden small lenders with auditors. Small lenders could work with accountants for the moment.”

Robert Hobart, the Chief Executive Officer of NBFIRA, assured the industry that levies and fees will not kill their businesses.

“We want to be cost effective when regulating, but we need to cover our costs. We have benchmarked ourselves on neighbouring jurisdictions. We have not yet figured out fees because we do not know what our costs are,” said Hobart.
Swanepoel added that at the moment, there will be no capital requirements, but said that those who start the business must put something on the table. He said lenders need money to start the business which is the reason why the authority needs information from both small and big lenders.

Lenders had queried that coming up with capital adequacy will lock out some small players from entering the market.
One representative, Isaac Mosienyane, advised the regulator to take into account the different sizes of lenders because there are smaller cottage lenders without systems and bigger structured ones.

“We are not rushing into this (regulation). Botswana was behind in supervising micro lenders. We will want an input from you and hopefully we will reach an agreement,” added Hobart.


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