RESERVE BANK OF ZIMBABWE BANK LICENSING, SUPERVISION AND SURVEILLANCE MINIMUM LICENSING REQUIREMENTS FOR A DEPOSIT-TAKING MICROFINANCE INSTITUTION LICENCE October 2013
1. GENERAL REQUIREMENTS Application to set up a deposit-taking microfinance institution in Zimbabwe shall be accompanied by: a) non-refundable application fee of US$2,000 payable to the Reserve Bank of Zimbabwe Account: 2 0 5 3 5 0 7 through a cash deposit in the Reserve Bank banking halls, or via an RTGS transfer. b) certified copies of Certificate of Incorporation and Memorandum and Articles of Association of the company; c) proof of authorized and paid-up capital (Form CR2); d) proposed directors (Form CR14) and; e) proof of account(s) opened with at least one commercial bank. The application form can be obtained from the Reserve Bank's Bank Licensing, Supervision and Surveillance Division. 2. PERMISSIBLE ACTIVITIES FOR DEPOSIT-TAKING MICROFINANCE INSTITUTIONS Deposit-taking microfinance institutions (DEPOSIT-TAKING MICROFINANCE INSTITUTION) may conduct the following activities: a) accept deposits including savings and time deposits; b) provision of credit facilities; c) provision of ancillary banking services such as domestic remittance of funds and safe custody, capacity building in areas such as record keeping and small business management; 2
d) provision of payment services such as salary, gratuity and pensions; e) maintenance and operation of various types of account with other banks in Zimbabwe; f) provision of leasing and hire-purchase facilities; g) provision of guarantees; and h) provision of housing microfinance. 3. NON PERMISSIBLE ACTIVITIES FOR DEPOSIT-TAKING MICROFINANCE INSTITUTIONS Deposit-taking microfinance institutions shall not engage in the provision of the following financial services: a) foreign exchange transactions except as specifically authorised by the Exchange Control Authority; b) demand deposits withdrawable by cheque; c) dealing in real estate except for own purposes such as acquisition of office space and staff accommodation; and d) allow any facility for speculative purposes. 4. OWNERSHIP 4.1 Deposit-taking microfinance institutions may be established by individuals, institutions and "financial entities" as defined in the Banking Regulations, S. I. 205 of 2000. 4.2 Trustees and nominee companies are not eligible to acquire shareholding in deposit-taking microfinance institutions in Zimbabwe. 3
4.3 The following maximum shareholding thresholds shall apply:- Limit on effective Category shareholding (direct & indirect shareholding) Individuals 15% Corporate bodies/companies (excluding trustees 10% and nominee companies) Financial entities 100% 4.4 Shareholders will be subjected to the fit-and-proper person assessment to determine their suitability to hold shareholding in a microfinance institution. 5. MINIMUM CAPITAL REQUIREMENTS 5.1 The minimum capital required to register a deposit-taking microfinance institution shall be US$5,000,000.00 which will increased to US$10,000,000.00 by 31 December 2020. 5.2 The minimum capital requirements will be subject to review by the Reserve Bank from time to time in line with changing fundamentals in the general macroeconomic and business environment. 5.3 The following should be submitted together with the application: a) satisfactory, verifiable and acceptable evidence of payment by the proposed shareholders of the minimum capital requirement; b) proof of source of capital in the form of bank statements, investment redemption statements, etc; 4
c) proof of registration of the capital with the Registrar of Companies, in the form of copies of Forms CR5, CR11, CR2 and receipt for payment of stamp duty; and d) personal statement that capital does not originate from bank credit, any form of credit or questionable sources and any activity that relates to money laundering. 6. CORPORATE GOVERNANCE 6.1 Corporate Governance relates to the suitability and adequacy of the proposed board of directors and senior management, as well as the adequacy of the risk management structures in place. 6.2 The proportion of executive, non-executive directors and independent directors should meet the requirements outlined in the corporate governance regulations/guidelines/standards issued by the Reserve Bank. Independent non-executive directors should form the majority. 6.3 The appointment of new directors and senior management will be subject to Reserve Bank approval. 6.4 Directors, executive management and heads of all key risk areas will be subjected to the fit and proper person test to determine suitability. 6.5 The following will negatively affect promoters' prospects in the evaluation of the licensing application: a) material misrepresentation of information; 5
b) failure to disclose pertinent facts; and c) acting in a fraudulent manner. Board of Directors 6.6 The operations of every deposit-taking microfinance institution shall be directed by a board consisting of not fewer than five directors. 6.7 A current employee of a bank or other financial institution is not eligible for appointment as a director of a deposit-taking microfinance institution, except where the deposit-taking microfinance institution is promoted by a bank or other financial institution and the person is representing the interest of such institutions. 6.8 At least two [2] members of the board of directors other than the executive management will be required to have banking or related industry experience. The board should have the necessary depth and diversity of skills and relevant experience to adequately provide direction and oversight of the deposittaking microfinance institution's operations. Senior Management 6.9 The following minimum qualifications and experience are mandatory for officers appointed to key/top management positions in the deposit-taking microfinance institution: 6
a) Managing Director/Chief Executive - a recognized university degree or its equivalent and/or relevant professional qualification with at least 5 years post qualification experience in banking or related industry; and b) Departmental Head - a recognized university degree or its equivalent and/or relevant professional qualification with at least 3 years post-qualification experience in banking or related industry. 7. BUSINESS PROPOSAL FOR A DEPOSIT-TAKING MICROFINANCE INSTITUTION 7.1 The business proposal for the establishment of a deposit-taking microfinance institution in Zimbabwe shall contain the following and other relevant information:- Identifying Information and Background Analysis 7.2 Name and location of the proposed deposit-taking microfinance institution. This should include physical addresses of all the proposed branches. Copies of the lease agreements for the premises being used by the head office and all branches should be submitted. 7.3 The institution's corporate structure, including every associate of the institution, and the functions and responsibilities of the top management team. 7
7.4 A brief discussion of the background to the application, including how the promoters/founders came together. 7.5 The composition of the board of directors and the personally signed and dated CVs of directors including other directorships held [if any]. 7.6 The composition of proposed board committees to facilitate effective oversight of the business. These should include Credit, Loans Review, Asset & Liability and Audit Committees with their respective detailed Terms of Reference. 7.7 All senior managers are required to submit detailed CVs which must be personally signed and dated. 7.8 All accountable persons (significant shareholders with at least 5% shareholding, directors, senior management) should submit the following: a) net worth statements duly certified by auditors registered in terms of the Public Accountant and Auditors Act [Chapter 27:12]; b) tax clearance certificates; and c) current police clearance certificate. 7.9 All accountable persons should submit, in terms of section 2.13 of Guideline No. 01-2004/BSD: Corporate Governance, affidavits containing declarations as to: a) insolvency or bankruptcy, civil judgments for debt, civil liability for fraud or misconduct, and/or any assignment to, 8
arrangement or composition with creditors, whether in Zimbabwe or any other country; b) criminal convictions, sentences served, and/or free pardons granted, whether in Zimbabwe or any other country; c) disclosures of: i. non-performing loans in Zimbabwe or any other country; ii. directorships in other companies; and iii. shareholding in other companies (including shareholding in a related subsidiary, whether held directly or indirectly through other interests; will require full disclosure); d) representations that he or she has not been involved in the directorship or management of a failed banking or financial institution or bank holding company or been responsible for the failure of such institution, including institutions placed under liquidation by the Reserve Bank; he or she has not been under suspension or been removed from office; and that he or she has not been associated with any other business practices or otherwise conducted him or herself in such a manner as to cause doubt on his or her competence, integrity and soundness of judgment. Market Analysis 7.10 Identification of the market(s) to be served by the applicant banking institution. 7.11 Description of the economic characteristics of the identified markets, including anticipated changes in the market, factors influencing such changes and possible effects on the institution. 9
Business Strategy and Objectives 7.12 The objectives and aims of the proposed deposit-taking microfinance institution. 7.13 The justification for the establishment of the deposit-taking microfinance institution including description of the developmental value of the proposed deposit-taking microfinance institution to the target community and the economy at large. 7.14 Description of the products and services to be offered by the proposed deposit-taking microfinance institution. 7.15 The branch expansion programme [if any] within the first five years. 7.16 The proposed training programme for staff and management. Capitalization and Additional Capital Sources 7.17 Description of the plans for financing growth, internally or externally, over the first 3 years of operation. 7.18 Description of what additional capital sources are available should the need arise. Financial Projections and Underlying Assumptions 7.19 The business plan should include the following financial projections based on best, normal and worst case scenarios: a) a projected annual balance sheet for the first 3 years of operation; 10
b) a projected annual income statement (profit and loss account) for the first 3 years of operation; and c) a projected cash flow statement for the first 3 years of operation. 7.20 Financial projections should be supported by major assumptions upon which they are based, with reference to variables such as market growth, funding capacity, inflation rates and interest rates, and any other variables of importance to the deposit-taking microfinance institution's performance such as products to be offered and markets to be served. The projections and assumptions should be reasonable and realistic in light of prevailing and forecast economic performance, industry performance, outlined strategies, etc. 7.21 The projected accounts should take into account the regulatory capital, provisioning requirements, lending limits, and any other requirements to be complied with. 7.22 The Reserve Bank may during the evaluation of a proposal to set up a deposit-taking microfinance institution, arrange an appraisal meeting with the promoters of the proposed deposittaking microfinance institution. The date and time for the meeting will be communicated to the promoters in writing. 7.23 The Registrar will grant a licence to the deposit-taking microfinance institution upon compliance with the licensing requirements. Where the granting of a licence is declined, the 11
reason(s) for refusal will be communicated in writing to the applicant. 7.24 Where a licence is granted subject to some conditions, the deposit-taking microfinance institution should comply with those conditions to the satisfaction of the Reserve Bank, within such period as stipulated by the Reserve Bank. Failure by a deposittaking microfinance institution to comply with such conditions may result in the cancellation of the issued licence. *Promoters should note that any falsification and misrepresentation of facts would not only lead to denial of the applied licence but also to the blacklisting of the offending individuals.* 12
8. CHECKLIST OF REQUIRED DOCUMENTATION AND INFORMATION AT LICENSING STAGE 1. Completed Application Form accompanied by proof of payment of an application fee of $2000. 2. Proof of deposit of capital. 3. Certificate of incorporation. 4. Memorandum and Articles of Association. 5. Company's bank statement. 6. Proof of registration of authorized and paid-up capital. 7. Proposed shareholders and proof of sources of capital. 8. Proposed directors and senior management. 9. Business Plan outlining: a) Corporate / group structure; b) Business strategy and objectives; c) Market analysis; d) Developmental value of the bank; e) Capitalization plan; f) Projected financials for first 3 years of operation under normal, best case and worst case scenarios and the underlying assumptions. 10. For all accountable persons (shareholders with 5% shareholding, directors, senior management) the following as applicable: a) Detailed and signed CVs; b) Certified net worth statements; c) Tax clearance certificates taken in the last six (6) months; d) Police clearance certificate taken in the last six (6) months; and 13
e) Affidavits by the proposed accountable persons. 11. The Registrar of deposit-taking microfinance institutions also reserves the right to acquire information on shareholders, directors and senior management from any other reliable source. 12. Audited financials for the past three years for corporate shareholders with a minimum of 10% shareholding); Corporate shareholders should also submit their Certificate of Incorporation, Memorandum & Articles of Association, as well as their shareholding structure and Tax Clearance certificates. 14