Micro lenders threatened with closure

The financial services industry regulator, Namfisa, has threatened micro lending institutions with closure for violating regulations barring them from retaining bank cards and Personal Identification Numbers (PIN) as security for loans.
Isack Hamata, the corporate communications manager for Namfisa told The Economist that the problem was rampant adding that steps are being taken to deal with the issue. He, however said they were facing problems “due to the wide dispersion of the micro-lenders.”
He said: “We have identified a number of micro-lenders who are not complying to our requirements. We have notified them via print media. Within 30 days of the public notice these micro-lenders are expected to make public representations regarding why they should not be deregistered. Those that don’t come back will be deregistered automatically. Those that make representations will be considered on individual merits. Those that are found to be non-compliant in terms of furnishing returns and paying levies will be deregistered.”
Hamata added: “It is evidently difficult to keep an eye on each and every one of them. We have continuously called on the public to report to NAMFISA any micro-lender that demands card and PIN to lend money to borrowers.”
Namfisa has been running a media campaign in the past two months advising the public to report micro lenders who retain bank cards as securtiy for loans advanced. Part of the campaign message reads: “The practice of retaining a Card and PIN was prohibited on 6 August 2002 in accordance with the provisions of Exemption Notice No. 136 of 6 August 2002, as published in Government Gazette No. 2782 of 6 August 2002.
“With effect from 1 March 2012, Microlenders and money lenders may not retain the Bank Cards and PIN of borrowers in respect of micro-loans.
“Borrowers are urged to report Microlenders who still insist on keeping their Bank Cards and PIN as from 1 March 2012.”
Hamata said in instances where violations of such nature were reported, Namfisa conducted investigations and confiscated the cards and handed them back to their owners.
There are currently 388 micro-lenders on Namfisa’s books.