AmendmentFintech

Opening, Relocation, and Closure of Branch or Sub-Branch Offices of Microfinance Institutions (Directive No. 954/2022)

National Bank Of Ethiopia954/2022

Summary

This directive, a second amendment to Directive No. 954/2022, outlines the procedures for microfinance institutions regarding the opening, relocation, and closure of their branch and sub-branch offices, emphasizing sound practices for institutional safety and soundness.

Who's affected

Microfinance institutions operating in Ethiopia.

Action required

Microfinance institutions must review the directive and ensure compliance with procedures for opening, relocating, and closing branches and sub-branches, including obtaining necessary licenses and notifying the National Bank of Ethiopia within stipulated timelines.

Key points

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  • This is the second amendment to Directive No. 954/2022.
  • It governs the opening, relocation, and closure of microfinance institution branches and sub-branches.
  • Specific requirements are outlined for opening new branches, including feasibility studies, staff training, and physical security.
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    • Sub-branch opening and relocation require notification to the National Bank, not prior approval.
    • Closure of any office requires prior written approval from the National Bank and customer notification.
    • Existing branches must be licensed within six months of the directive's effective date.
    • Directive No. 309/2020 is repealed and replaced by this directive.

Requirements

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  • Conduct a feasibility study before opening a new branch.
  • Provide adequate training to staff on policies, procedures, and AML/CFT requirements.
  • Distribute relevant policy manuals, directives, and laws to appropriate staff.
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    • Ensure branches are secured, clean, and suitable for business.
    • Install cash safe vaults in branches.
    • Display an outdoor advertising board with institution name, branch name, and working hours.
    • Display a copy of the business license and branch license in a visible area.
    • Obtain a branch license from the National Bank within 30 working days of commencing operation.
    • Submit an application letter and notification form (Annex I) for new branch licenses.
    • Apply for a new branch license within 30 working days after relocating a branch or changing its name.
    • Inform the National Bank in writing with the full address within 30 working days after opening or relocating a sub-branch.
    • Notify the National Bank in writing and return the original branch license within 30 working days after downgrading a branch to a sub-branch.
    • Obtain written approval from the National Bank before closing a branch or sub-branch office.
    • Notify concerned customers prior to closure and protect their interests.
    • Submit an application at least 30 working days prior to the proposed closing date, justifying the reason and demonstrating closure preparations.
    • Return the original branch license upon closure approval.
    • Submit an application within 6 months from the effective date to obtain licenses for all existing branches.

Rights and permissions

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  • Microfinance institutions may open a new sub-branch office or relocate the office without the approval of the National Bank, provided they inform the National Bank in writing within 30 working days.

Restrictions

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  • A microfinance institution shall not close its branch or sub-branch office without getting written approval from the National Bank.
  • The opening, relocation, and closure activities of microfinance institutions' branch and sub-branch offices necessitate sound and prudent practices.

Objectives

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  • Ensure the safety and soundness of microfinance institutions through sound practices in branch and sub-branch operations.
  • Provide clear guidelines for the opening, relocation, and closure of branch and sub-branch offices.
  • Regulate the licensing and supervision of microfinance institution branches.

Organizations

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  • National Bank of Ethiopia

Legal references

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  • Microfinancing Business Proclamation No. 626/2009
  • Microfinance Business Proclamation No. 1164/2019
  • LICENSING AND SUPERVISION OF MICROFINANCE BUSINESS Opening, Relocation and Closure of Branch or Sub-branch Offices of Microfinance Institutions Directive No. 954/2022
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    • LICENSING AND SUPERVISION OF THE BUSINESS OF MICROFINANCE INSTITUTIONS BRANCHES Directive No. 309/2020
Original sourcehttps://justice.gov.et/en/directives/opening-relocation-and-closure-of-branch-or-sub-branch-offices-of-microfinance-institutions-directive-no-954-2022/
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