- INTRODUCTION:
The Banking and Financial Services Act (BFSA), 1994, gives the Bank of Zambia the authority to license, regulate and supervise banks and other financial institutions registered under the referred Act.
- TYPES OF MICROFINANCE SECTORS
There are mainly two categories of non-bank financial institutions:
- Deposit financial institution
- Non-deposit financial institution
Deposit Financial Institution:
These institutions are permitted to collect money from the public by accepting deposits, which they hold in accounts like savings, current, and fixed deposits. They use these funds to give loans, invest, and offer other financial services. Examples include banks, credit unions, and savings and loan associations.
Non-Deposit Financial Institution:
This category of financial institutions do not take deposits from the public. Instead, they provide financial services like lending, insurance, and investment management using funds from other sources. They work more like intermediaries in financial transactions.
- WHO CAN APPLY FOR THE NON-DEPOSIT LICENCE IN ZAMBIA?
In Zambia, both individuals and companies can apply for a non-deposit taking microfinance license, as long as they meet the requirements set by the Bank of Zambia (BoZ). This license allows the holder to offer credit facilities but not to mobilize deposits
- WHAT IS THE REQUIRED MINIMUM SHARE CAPITAL?
The minimum share capital requirements for non-bank financial institutions are as follows:
- FINANCIAL INSTITUTIONS (DEPOSIT-TAKING)
- Housing Finance Institutions K50,000,000
- Savings and Credit Institutions K50,000,000
- Leasing Companies K50,000,000
- FINANCIAL BUSINESSES (NON-DEPOSIT TAKING)
- Development Finance Institutions K750,000,000
- Leasing Companies K5,000,000
- Credit Reference Bureau K1,500,000
- WHAT IS THE MINIMUM NUMBER OF SHAREHOLDERS & DIRECTORS REQUIRED?
For a non-deposit financial institution in Zambia, the minimum number of shareholders is two. This is because in Zambia, a private company (which is what you will usually register for this licence) can be formed by a minimum of two people. The minimum number of directors is also two.
- WHAT ARE THE REQUIREMENTS FOR OBTAINING THE LICENCE?
A company intending to apply for a licence for a non-bank financial institution, will be required to write to the Registrar of Financial Service Providers (“the Registrar”) submitting the proposed name of the institution for clearance.
To operate a non-bank financial institution in Zambia, it is a requirement that the institution be registered with the Bank of Zambia.
The following forms, which can be collected from the Bank of Zambia or downloaded from the Bank of Zambia website, must be completed and submitted by the applicant to the Registrar:
- An application form (Form BFI) completed by the promoters of the non-bank financial institution;
- The Directors and Officers Questionnaire and Vital Statistics Forms filled out by prospective directors, shareholders, chief executive officer as well as the chief financial officer;
- Certified copies of identities, that is, National Registration Cards or Passports;
- In case of foreigners, Interpol Clearance certificates from their countries of origin must be submitted;
- Certified copies of academic and professional qualifications; and
- Curriculum vitae, including details of nationality or residence, for the directors and senior management and full names of referees and their contact details (i.e. proposed directors, chief executive officer and chief financial officer) of the proposed non-bank financial institution.
The above stated forms must be accompanied by the following:
- Certificate of Incorporation and Articles of Association for the company;
- Evidence of minimum required capital for the category of non-bank financial institution. The evidence shall be in the form of a letter from an audit firm registered with the Zambia Institute of Chartered Accountants.
- The source of the initial capital to be invested and that of any future funding shall be disclosed to the Bank of Zambia.
- A business plan with financial projections and forecasts for a minimum of three years from commencement date. This should include an income statement, balance sheet, cash flow statement and a copy of the accounting policies to be adopted by the proposed non-bank financial institution. Underlying assumptions must be clearly stated in the business plan;
- Audited financial statements (where applicable) of the company for the year immediately preceding the application; and
- Any other documents in support of the application, as may be requested by the Bank of Zambia.
It is very important to note that the applicant is required to pay the following:
- A non-refundable application fee of K5,400.00 payable at the time of making the application; and
- Upon grant of a licence, an annual licence fee applicable to the category of financial institution and payable at the beginning of each year.
The applicable annual licence fees for non-bank financial institutions are as follows;
For Bank of Zambia Fee Structure
- Non-Bank Financial Institutions K2,700.00
- Bureau de Change K10,800.00
For Security screening fees for directors and senior staff are as follows;
- Clearance of Zambians based locally K84.00
- Clearance of Zambians resident outside the country K795.00
- Local clearance of foreigner’s resident in Zambia. (All foreign nationals must submit Interpol clearance certificates from their country of origin, immigration and work permits. For those who have lived in Zambia for more than six months, Zambia Police clearance must be provided) K795.00
The application, security screening and licence fees may be paid by cheque or by electronic funds transfer method or such other method as may be prescribed by the Bank of Zambia from time to time.
Processing of application
Upon receipt of a complete application, the Bank of Zambia shall, within 120 days for financial institutions other than bureau de change, review the application and determine whether a license should be granted to the applicant or not.
An application is considered to be complete when all the necessary documents have been submitted and the application fee has been paid. Upon receipt of a complete application, the Bank of Zambia will inform the applicant that it has received a complete application and the stipulated days for consideration of an application will commence from this date.
Where the Registrar is satisfied that the applicant:
- is fit and proper and has met all the requirements of the Banking and Financial Services Act, Chapter 387 of the Laws of Zambia; and
- has met all the requirements set by the Bank of Zambia,
The Registrar may then consider approving the application.
Post-Licence Requirements
When the requirements under Part 2 have been fulfilled and the Registrar has approved the application, the applicant will be required to provide evidence of fulfilment of the minimum requirements for the premises of a NBFI. When the premises are ready, the Bank of Zambia will conduct an inspection of the premises.
The premises where a non-bank financial institution is licensed to operate should meet the following minimum requirements:
- Possession of a lease agreement, where the premises are on lease or a Certificate of Title, where the premises are owned by the company (i.e., the non-bank financial institution);
- Suitable location in an area that meets the needs of the targeted clientele;
- Proper offices for the conduct of intended business;
- The name of the non-bank financial institution should be prominently displayed on the building in which the non-bank financial institution is housed;
- Telephone, facsimile and email facilities;
- Safe (s);
- Adequate security measures e.g. electronic alarm, security guard(s), etc.; and
- Any other requirements, as may be advised by the Non-bank Financial Institution of Zambia.
Issuance of a non-bank financial institution licence
Upon approval of the application and payment of the annual licence fee, the Registrar will then issue the applicant with a non-bank financial institution licence to conduct non-bank financial institution business. when a licence is granted, it is subject to a number of conditions and is valid until revoked by the Bank of Zambia or surrendered by the non-bank financial institution.
Once a non-bank financial institution is registered, it becomes subject to the supervisory powers of the Bank of Zambia as provided for in the Bank of Zambia Act and the BFSA. A non-bank financial institution is also supposed to adhere to and prudential requirements relating to, inter alia, reserves, capital adequacy, liquidity, restrictions on lending and exposures to insiders.
All non-bank financial institutions operating in Zambia are supervised by the Non-Bank Financial Institutions Supervision Department of the Bank of Zambia.
Other Requirements
The following are some of the key requirements that non-bank financial institutions are supposed to take into account:
- Once licensed, the non-bank financial institution is subjected to regular on-site and off-site inspections
- The non-bank financial institution shall be expected, inter alia, to file monthly prudential returns;
- A non-bank financial institution shall not close a branch without giving the Bank of Zambia notice, as provided for under the Banking and Financial Services Act;
- A non-bank financial institution shall not change its shareholders, directors, senior managers or its name without prior written approval from the Bank of Zambia;
- A non-bank financial institution shall ensure that it is compliant with sections 23 and 24 of the BFSA at all times;
- A non-bank financial institution shall ensure that it has a Compliance Officer who shall, inter alia, ensure that a non-bank financial institution complies with the provisions of the BFSA the Prohibition and Prevention of Money Laundering Act, Number 14 of 2001 and all other relevant legislation. A non-bank financial institution shall also ensure that it has adequate internal anti-money laundering policies, guidelines and training programmes upon commencement of business;
- A non-bank financial institution shall submit to the Bank of Zambia such other information as may be required by the Bank of Zambia from time to time.
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About KORIAT & CO.
We are a commercial law firm with head office in Lagos, Nigeria. We assist clients from different nationalities in company registration and processing of business licence in Nigeria, Ghana, Kenya, Rwanda and Uganda. We also provide company secretarial services and general legal support for registered businesses.
The above article is not legal advice and does not automatically make our readers our clients unless they specifically instruct us to act or represent them in any way.
Please contact Koriat & Co. through admin@koriatlaw.com or 09067842241 (also WhatsApp) if you require additional information about or assistance in registering or getting a fintech licence in either payment or lending sectors.
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