Economy

Law to regulate microfinance in pipeline

AS a means to promote financial inclusion, empowering individuals who usually lack access to traditional banking services and control illegal microfinance institutions, Zanzibar has embarked on legal process to regulate microfinance.

The bill with the aim of licensing, regulating and managing microfinance business is to be read for the second time in the next session of the Isles House of Representatives, later this month.

If the bill is passed into law, it will be the opportunity for institutions and individuals to provide financial services to expand the scope of financial services in the country and maintain the stability, safety and sound microfinance sector.

The proposed law also aims at setting up a procedure for identifying and officially registering the institutions that provide microfinance services by addressing the challenges that emerged in the past.

The enactment of the law is a milestone in regulating the microfinance sector which for a long time was run without legal supervision and caused thousands of people to lose their money before the government intervention.

In 2021, the government banned the activities of Masterlife Microfinance Company after discovered that it was operating microfinance business without legal registration.

Atleast 10,300 investors had invested more than Sh12.3 billion in the Company before the government intervened to curb the activities carried out.

Mohammed Hassan, an economist, has expressed hope that a law to regulate operations in the sub-sector will be friendly to the stakeholders.

“This is a milestone step in strengthening the economy of Zanzibar. As we are aware that microfinance institutions will provide small loans, savings, and other financial services to low-income individuals and entrepreneurs,” he said.

He said microfinance institutions emerged as an alternative financing source and a powerful instrument for poverty reduction among relatively poor people.

He said microfinance plays a crucial role in promoting financial inclusion by extending financial services to marginalized individuals and communities.

“It helps them in fulfilling their specific financial requirements, generate income, and improve their overall economic well-being. By providing access to financial resources, microfinance empowers individuals to make their lives better,” he said.

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