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Requirements for Licensing and Renewal of Microfinance Business (Directive No. 300/2013)

National Bank Of Ethiopia300/2020

Summary

This directive establishes the requirements for obtaining and renewing a microfinance business license in Ethiopia. It outlines the application process, necessary documentation, conditions for commencing operations, and renewal procedures. The directive aims to promote a strong and viable microfinance sector, ensure the safety and soundness of microfinance business, and establish clear, objective, and transparent licensing requirements.

Who's affected

Entities seeking to establish or renew licenses for microfinance businesses.

Action required

Entities must review the directive and ensure all licensing and renewal requirements are met, including submitting the required application forms, supporting documents, and fees.

Key points

7
  • Establishes requirements for licensing and renewal of microfinance businesses.
  • Defines roles of organizers, project managers, directors, and chief executive officers.
  • Details pre-application and application phase requirements.
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    • Outlines conditions for commencement of operations.
    • Specifies license display and renewal procedures.
    • Lists fees for investigation, licensing, and renewal.
    • Repeals previous directives (MF1/04/96 and specific articles of MFI/01/96).

Requirements

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  • Appointment of a project manager with a first-degree education and business experience.
  • Organizers and project managers must be honest, reputable, and diligent.
  • Evidence of registration of trade name.
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    • Submission of prospectus and application forms.
    • Evidence of paid-up capital and blocked subscription account.
    • Duly completed general information and propriety test questionnaires for organizers, project managers, directors, and chief executive officers.
    • Business plan including executive summary, market analysis, organizational structure, financial projections, etc.
    • Evidence of payment of investigation and licensing fees.
    • Implementation of comprehensive policies and procedures for credit, human resource management, procurement, liquidity, internal audit, MIS, finance, risk management, fixed assets, and corporate governance.
    • Hiring and training of adequate staff.
    • Ensuring business operating areas meet ventilation, sanitary, and lighting standards.
    • Obtaining insurance coverage for premises and cash.
    • Display of valid business license.
    • Annual renewal of business license.
    • Payment of renewal fee and/or penalty.

Rights and permissions

2
  • Right to obtain a microfinance business license upon meeting the specified requirements.
  • Right to renew the microfinance business license annually.

Restrictions

5
  • Organizers and project managers must be honest, reputable, and diligent, with restrictions based on criminal convictions, fraud, withholding information, non-compliance, disputes with employers, refusal of trade licenses, bankruptcy, default on loans or tax payments, and carrying non-performing loans.
  • Directors and chief executive officers are subject to similar propriety tests as organizers and project managers.
  • Related parties of microfinance institutions and organizers have restrictions related to transactions with the institution.
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    • Restrictions on commencing operations until all conditions are met.
    • Requirement to display the license in a conspicuous place.

Penalties

2
  • Penalties may apply for failure to pay renewal fees.
  • Providing false or misleading statements is an offense under Microfinancing Business Proclamation No. 626/2009.

Objectives

3
  • Promote a strong and viable microfinance sector in Ethiopia.
  • Ensure the safety and soundness of the microfinance business.
  • Establish clear, objective, and transparent requirements for licensing and renewal of microfinance businesses.

Organizations

3
  • National Bank of Ethiopia
  • Ministry of Trade
  • Regional Trade Bureaus

Legal references

4
  • Microfinance Business Proclamation No. 626/2009, Articles 5(1 a & b), 5 (2), 6 (2), 27 (2) and 28
  • Requirements for Persons with Significant Influence in a Microfinance Institution Directives No.MFI/21/2012
  • NBE Directives No. MF1/04/96 (Repealed)
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    • NBE Directives No. MFI/01/96, Articles 3 and 4 (Repealed)
Original sourcehttps://justice.gov.et/en/directives/requirements-for-licensing-and-renewal-of-microfinance-business-directive-no-300-2013/
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