BANK Of ZAMBIA
NON-BANK FINANCIAL INSTITUTIONS SUPERVISION DEPARTMENT
NON BANK FINANCIAL INSTITUTIONS
LICENSING PROCEDURES
TABLE OF CONTENTS
1.0 NON BANK FINANCIAL INSTITUTIONS LICENSING PROCEDURES ... 1
1.1 Introduction ... 1
1.2 Ownership structure and suitability of shareholders ... 1
1.2.1 Assessment of Shareholders ... 2
1.3 Fit and Proper Test for Board of Directors and Management ... 2
1.3.1 Assessment of Management ... 3
1.3.1.1 Criteria for Management ... 4
1.3.1.1.1 Methods of Assessing Management Suitability ... 4
1.4 Business Plan and Internal Control Systems ... 4
1.4.1 Assessment of the Business Plan and Financial Projections ... 5
1.4.1.1 Assessment of Capital ... 6
1.4.1.1.1 Initial Capitalisation ... 6
1.4.1.2 Projected Financial Statements ... 6
1.4.1.3 Consistency Tests... 7
1.4.1.4 Analysis of Earnings ... 7
1.5 Economic Development ... 7
1.6 Overall impact on the financial sector ... 8
2.0 LICENCE APPLICATION ... 8
3.0 LICENSING PROCEDURES ... 9
3.1 Name Clearance Stage ... 10
3.1.1 Registration of Company at Patents and Companies Registration Agency (PACRA) 10 3.2 Informal Pre-filing Stage ... 10
3.3 The Application Stage... 10
3.4 Licensing Process... 10
3.5 Community Needs and Support ... 11
3.6 Licensing of Foreign NBFI’s Subsidiaries ... 11
4.0 CONCLUSION ... 12
5.0 APPENDIX I ... 13
REQUIREMENTS FOR SETTING UP A NON BANK FINANCIAL INSTITUTION IN ZAMBIA ... 13
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1.0 NON BANK FINANCIAL INSTITUTIONS LICENSING PROCEDURES 1.1 Introduction
The Bank of Zambia (BoZ) mission is to formulate and implement monetary and supervisory policies that achieve and maintain price stability and promote financial system stability. The BoZ is charged with the responsibility of regulating and supervising commercial banks and non-bank financial institutions (NBFIs) falling under the Banking and Financial Services Act Cap 387 of the Laws of Zambia of 2004 (BFSA). Regulating the entry of new NBFI’s is a crucial part of this supervisory responsibility.
In order to promote a healthy financial system, procedures for licensing NBFIs and the scope of activities governed by licenses should be clearly defined. The inability to effectively control entry into the financial sector and thus restricting such entry to viable NBFIs can contribute to financial sector weaknesses. Preventing such situations is a major concern of the BoZ as a supervisory authority.
The BFSA gives the BoZ the authority to license NBFIs, and the right to set criteria and reject applications for applicants that do not meet the set standards. Clear and objective criteria reduce the potential for different interpretations by various individuals.
The licensing process, at a minimum, consists of an assessment of the NBFI’s ownership structure, directors and senior management, its business plan and internal controls and its projected financial condition, including its capital base.
The BoZ, as licensing authority, determines that new NBFIs have fit and proper shareholders, with adequate financial strength, and management with sufficient expertise and integrity to operate the NBFI in a sound and prudent manner. It is important that the criteria for issuing licenses are consistent with those applied in ongoing supervision so that they can provide one of the bases for revoking a licence when an established institution no longer meets the criteria although the licensing process cannot guarantee that a NBFI will be well run after it opens.
Licensing procedures are an effective method for ensuring that NBFIs that enter the financial system are sustainable by imposing barriers to entry for persons with insufficient financial resources and unfit and improper elements. Both factors are necessary to maintain public confidence in the financial system. Having established strict criteria for reviewing a NBFI licence application, the BoZ reserves the right to reject an application if the criteria set out below are not met.
1.2 Ownership structure and suitability of shareholders
The BoZ must be able to assess the ownership structure of NBFIs. This assessment will include the NBFI’s major shareholders. This assessment will review the controlling shareholders’ past financial business ventures, their integrity and standing in the business community, as well as financial strength of all major shareholders and their ability to provide further financial support should it be needed. As a part of the
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process of checking integrity and standing, the BoZ will seek to establish the source of the initial capital to be invested.
Where a NBFI is a part of a larger organization, the BoZ will attempt to establish that the ownership and organizational structure will not be a source of weakness and will minimize the risk to depositors of contagion from the activities conducted by other entities within the larger organization. The other interests of the NBFI’s major shareholders will be reviewed and the financial condition of those related entities assessed. The prospective NBFI should not be used as a captive source of finance for its owners. When evaluating the corporate affiliations and structure of the proposed NBFI within a conglomerate, the BoZ will ensure that there is sufficient transparency to permit them to identify the individuals responsible for the sound operations of the prospective NBFI and will make certain that these individuals have the autonomy within the group structure to respond quickly to supervisory recommendations and requirements.
1.2.1 Assessment of Shareholders
The assessment of shareholders commences with shareholders furnishing the BoZ with required information. This requirement is made known in advance as part of the pre-filing stage. As the licensing authority, the role of the BoZ will be to verify the information submitted and to consult the references provided.
Requirements include:
a) An auditor's certificate confirming the paid-up capital position;
b) Extracts from the directors’ questionnaire, showing the other business interests of the shareholder and financial statements with regard to these other interests; and
c) Police statements that the shareholder has not been investigated/convicted by the police with regard to any criminal activity on the part of the shareholder. In addition to the above documents, all shareholders who are natural persons and directors of the NBFI are required to complete directors’ questionnaires. Since the suitability of the shareholders is a requirement for obtaining a licence, any proposed
material changes in shareholders must be approved by BoZ.
1.3 Fit and Proper Test for Board of Directors and Management
A key aspect of the licensing process is an evaluation of the competence, integrity and qualifications of proposed management, particularly the board of directors. The board of directors is ultimately responsible for the safe and sound operations of a NBFI, although the day-today operating responsibilities are delegated to management. On an effective board, every director counts and each must be “fit and proper” to serve the interests of the NBFI and other shareholders.
The BoZ will obtain the necessary information about the proposed directors and senior managers to consider individually and collectively their financial sector experience, knowledge, soundness of judgement to properly undertake and fulfil their particular duties and responsibilities, other business experience, personal integrity and
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relevant skills. This evaluation of the board and management will involve background checks on previous activities, including regulatory or judicial judgements that could raise doubts concerning their competence, sound judgement or honesty. It is critical that the applicant’s proposed board and management team includes qualified and reliable persons with financial sector experience and good personal qualities. Another requirement is the presence of a board of directors of at least five members the majority of whom shall be resident in Zambia.
In assessing the character and experience of shareholders, directors and managers, BoZ will have regard to the following attributes::
Competence as demonstrated by the level of education or training.
Ability to exercise independent and informed judgement, in a particular business judgement (record of sound business decisions).
Probity (high integrity and abides by acceptable principles. No evidence of dishonesty or financial irregularities).
Reputation (carries respect in the financial community).
Possession of a particular skills set or experience that adds value to the board’s deliberations, such as accounting or finance; banking; or other industry knowledge.
Financial literacy, including knowledge of financial statements and an understanding of financial ratios in measuring performance.
Commitment to learn the financial sector business, meet the shareholders’ requirements; offer to resign if there is substantive change in professional responsibilities; and devote the necessary time and effort.
Management (understanding of current management “best practices” and their application in rapidly evolving business environments).
Crisis management (ability and time to deal with short and long term crises).
Leadership (ability to empower and motivate a high performance management team).
Strategy and vision (ability to provide strategic direction, conceptualize emerging trends and challenge innovation).
1.3.1 Assessment of Management
The BFSA requires that management of a NBFI be considered acceptable. This is because the financial sector relies on the confidence of the market and the public. If deposit taking NBFIs do not earn the trust of the public and the market, they will not be able to collect deposits and perform their economic function. Persons managing a NBFI must therefore be of such professional and personal reputation that they will enjoy this trust. It is therefore the duty of the BoZ to assess whether the management is worthy of this trust. Management must be of sufficient experience and good repute. These criteria are generally considered to have the same content as the more widely used criterion "fit and proper".
The applicant for a licence must demonstrate that management meets these criteria as part of the information provided. The burden of proof lies with the applicant.
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Suitability, or "fitness and propriety" or "sufficient experience and good repute", are criteria that the NBFI management must meet at all times.
1.3.1.1 Criteria for Management
The ultimate criterion is whether the manager will, on the basis of his or her character and experience, be able to retain the confidence of the depositors and of the participants in the financial sector.
The traits to be tested in assessing character and experience include:
i) Probity : The manager must have a reputation of honesty, integrity and uprightness.
ii) Knowledge : The manager should have knowledge of financial matters gained through formal training, with sufficient management expertise.
iii) Experience : Theoretical training is insufficient to be able to deal with dayto -day operational responsibilities. Practical experience is an essential pre-requisite in order to be able to manage a NBFI in a way that will have the confidence of the market and the public.
iv) Judgement : Ability and willingness to make sensible and wise decisions, especially in credit extension.
v) Reputation : It is important that a manager be seen to be a person of honesty, integrity and judgement by the persons with whom he has professional relations. vi) Diligence : A manager must have the ability to start a project and bring it to a
satisfactory end.
1.3.1.1.1 Methods of Assessing Management Suitability
a) The prospective managers will present curriculum vitae, complete vital statistics forms and complete directors’ questionnaires.
b) The BoZ will circulate among the Zambian security wings the curriculum vitae, vital statistics forms and directors’ questionnaires to enquire about the probity of the managers and shareholders of the prospective NBFI.
c) The informal discussion during the entire licensing process will provide opportunities to observe the style and competence of the prospective managers. In addition, the contents of the business plan presented will also be a basis of judgement.
1.4 Business Plan and Internal Control Systems
The applicants of the prospective NBFI will present a detailed business plan, outlining the envisaged activities, the resources with which these activities will be performed, the organizational structure, the expected financial results in the form of projected
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balance sheets, profit and loss accounts and cashflows. The applicants will discuss the plan with officers of the BoZ in person. The BoZ will make an independent assessment of the applicants’ ability to defend and discuss their plan. The quality of the business plan is an indication of the quality of the management.
The business plan should describe and analyse the NBFIs target market and establish a strategy for the proposed NBFI’s on-going operations. The plan should also describe how the NBFI will be organized and controlled internally. The BoZ will determine if these arrangements are consistent with the proposed strategy and will also determine whether adequate internal policies and procedures have been developed and adequate resources deployed. This will include determining whether appropriate corporate governance such as a board of directors with the ability to provide an independent check on management, independent audit and compliance functions and a management structure with clear accountability will be in place. In order to preserve clear lines of responsibility and accountability, it is best practice to separate the role of Chairman of the board and the role of Chief Executive Officer (CEO). The chairman should be a non executive board member and not have day-to-day operating responsibilities and the principles of segregation of duties, cross checking, dual control of assets, etc. are reviewed. It is essential to determine that the legal and operational structures will not inhibit BoZ supervision on either a solo or a consolidated basis and BoZ inspectors will have adequate access to management and information.
A business plan shall be attached with the application including the following data and information:
Full description of the financial services that the applicant intends to carry out in Zambia. For each activity, the client must fully describe the clients, the specified products the applicant intends to deal in, the services the NBFI intends to provide for its clients and scale of activity. The business plan shall include a SWOT analysis detailing the prospective NBFIs strengths, weaknesses, opportunities and threats identified plus any due diligence that has been conducted. The applicant should consider current and future market conditions and their impact on the targeted market sectors and explain how the applicant will deal with these market conditions. Any planned expansions should also be described.
Details of the applicant’s financial projections for the 3 years following the commencement of business. This should include a balance sheet, income and expenditure statement, cashflow statement and adopted accounting policies.
Underlying assumptions used in the financial projections should be clearly outlined.
1.4.1 Assessment of the Business Plan and Financial Projections
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a) The reasonableness of interest rate and exchange rate forecasts, developments in the economic sector, staffing and management, etc.
b) Consistency in the business plan; including that of cross references between the major components of the plan and the financial prognoses.
c) The assessment of management’s competence whether they fully understand the plan, can discuss it and defend it in a convincing manner. They should be able to explain it to the BoZ in their own words, and without reference to the text.
1.4.1.1 Assessment of Capital 1.4.1.1.1 Initial Capitalisation
a) The initial capital of a NBFI serves as funding:
i) for start up expenses, for instance the purchase or lease of the business premises, computer equipment and other inventory, initial salaries of staff etc.,
ii) to act as a buffer against losses;
iii) to serve as a signal of shareholders’ commitment by demonstrating the willingness to risk their own funds; and
A sufficiently high initial level of capital is desired.
b) Initial capital should be financed out of the shareholders own funds, not out of borrowed money. The shareholder must have sufficient net worth to have been able to finance his share purchase from his own funds.
c) Shareholders must be aware of the fact that they provide risk-bearing capital, which they might lose if the NBFI fails.
1.4.1.2 Projected Financial Statements
The applicant shall submit projected financial statements for each year of the first three years of operations, in accordance with international financial reporting standards, provided that the following is included:
The source and sources of funds;
The estimated income of the NBFI and expected expenditures;
The estimated capital adequacy ratio; and
The assumptions and technical bases used in calculating the expectations and estimations stipulated in the above mentioned three points.
The BoZ will consider the ability of proposed shareholders to supply additional financial support, if needed, once the NBFI has commenced operations. As has already been said,
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the source of the capital contribution paid in by shareholders should not have been borrowed. In addition, the BoZ will carefully examine the source of the funds to ensure that the funds originated from legitimate sources.
1.4.1.3 Consistency Tests
A sufficiently elaborate plan contains many opportunities to check internal consistency and plausibility. The BoZ will consider the following;
a) Compare the amount of regulatory capital projected over the period of the financial projections with the projected development of the credit business. Is it likely that the NBFI will continue to meet the capital adequacy requirements? Has the NBFI identified alternative or additional sources of regulatory capital if needed? Can the growth of capital sustain the growth of the lending business. b) Compare the projected number of staff with the projected development of the
credit business. Does the number of staff keep pace with a stable and sound growth of the credit portfolio?
c) Compare the growth of staff expenses with the growth of the number of staff; d) Are the projections of interest income consistent with the projections of the
growth of interest earning assets and interest paying liabilities, as well as the expected movement of interest rates in the economy?
e) Can the projections for growth of the credit portfolio and the deposit base be backed up by a plausible strategy to attract customers from the existing NBFIs? f) Is the growth rate over the period of the projections realistic? How does this
growth rate compare to the growth rates in the rest of the financial sector?
g) How do the projected interest earnings compare to the projected rate of inflation in the economy? Can positive real interest rates be sustained?
1.4.1.4 Analysis of Earnings
In assessing an application for a licence, the BoZ will review the profit and loss projections submitted as part of the business plan. Drawing on the experience of existing NBFINBFIs and knowledge of the financial market, the review will then reach a judgement as to whether the profit forecast is reasonable and achievable. This will give the new management an opportunity to demonstrate their professionalism and prudence. Subsequent profit results may then be compared to management's initial forecast as part of the exercise to assess how well-managed the NBFI is.
1.5 Economic Development
In reviewing an application for a licence to operate, the BoZ will also take into consideration the intentions of the applicant with regard to overall contribution to
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Zambia’s economic development. This will include its plans to introduce new financial services to the sector and in particular to rural areas where such services have been less than adequate.
1.6 Overall impact on the financial sector
In reviewing the suitability of an application for a licence to be a NBFI, the BoZ will also take into account the impact of the potential entrant on the overall soundness of the sector.
2.0 LICENCE APPLICATION
The licensing of NBFI’s is prescribed under Section 10 of the BFSA. The applicants shall present a formal application delivered to the Registrar of Banks including the following information/documentation.
2.1 Information of the applicants as contained in the application
Full names of each applicant, chosen address for the purpose of notification and number of shares for each of them
Curriculum vitae
Name, full contact details, legal status of applicants (where applicable).
Details of the applicants and the significant activities it carries out, both within Zambia and overseas. Including information on the group’s history and background including prior experience and market sector.
The applicants shall inform the BoZ if they currently, or previously have been the subject of any government or regulatory investigation, received a fine or been convicted of a crime inside or outside Zambia.
The BoZ provides a declaration to be signed by the applicants, stating that all data and documentation submitted are correct and consistent with the provisions of banking law, regulations, instructions issued pursuant thereto, as the case may be.
The Registrar shall within 180 days of receipt of a complete application for a licence, make a decision whether to grant a licence.
Where the BoZ is satisfied that the information required for a proper appraisal has been received, it shall issue a letter to the applicant stating that the application is complete and has been accepted, and the 180 days period stipulated in Section 5 of the BFSA for consideration
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of the application of a licence or refusal to grant a licence shall thereupon commence.
Where an application is incomplete, the BoZ shall request the applicant to provide the requisite information within a period of 10 days failure to which the application will be rejected.
Throughout the 180 day period, the BoZ will initiate a series of meetings and interviews with the applicants. This will allow the BoZ to form an opinion on the quality of the application and the ability of the applicants to execute their business plan.
The Registrar may grant an approval subject to the following conditions being met:
o The minimum amount of the NBFI’s authorised capital and the amount thereof earmarked for subscription
o Full payment of subscribed capital. Proof that the capital contributions have been paid in must be in the form of an external auditor’s certification).
o Proof that the source of the capital contribution paid in by the applicants is not borrowed. And that the source of the funds originated from legitimate means.
o Completion of all incorporation procedures of the NBFI
o Proposed names of the board of directors
o Proposed names of the chief executive officer, director finance and other senior managers
o Proof of the existence of reliable internal controls and operations systems.
o Any other requirements and provisions determined by the BoZ.
o The licence shall be revoked if the applicant does not commence operations within one year of obtaining the licence.
o If the requirements and provisions for final licensing are met, the BoZ shall issue a licence to the NBFI within 180 days of the date of a new application in which the licensing applicant confirms that such requirements have been met.
o The licence is issued in perpetuity unless it lapses or is revoked. It is provided that the final licence is not transferable.
3.0 LICENSING PROCEDURES
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3.1 Name Clearance Stage
Prior to submission of the formal application and registration of the company with the primary regulators (e.g. Registrar of Companies, Registrar of Societies etc.) an applicant must obtain clearance to use a proposed name for the NBFI. This is to ensure that the proposed name is not similar to an existing NBFI’s, which might create confusion in the market. An applicant is required, therefore, to seek written approval from the Registrar of Banks and Financial Institutions.
3.1.1 Registration of Company at Patents and Companies Registration Agency (PACRA)
Once the BoZ has approved the name, the applicants should apply to PACRA for incorporation of the proposed NBFI as a limited liability company.
3.2 Informal Pre-filing Stage
This stage involves meeting with prospective applicants to discuss the requirements for obtaining a licence, the licensing process and the feasibility of the prospective proposal. The importance of this stage is to clearly explain the requirements.
3.3 The Application Stage
The applicant submits a formal application to the Registrar. At this stage an acknowledgement will be sent to the applicant in writing clearly stating that a preliminary review of the application will be conducted to determine among other things, whether the application is complete. Where the application is complete, the acknowledgement letter shall state the date from which the application is deemed complete for purposes of satisfying the statutory period within which a licence application must be determined.
3.4 Licensing Process
Of these stages, the application stage is the core of the licensing process. It is at this stage that all the factors involved in evaluating a licence application come into play, creating a concrete and documented basis for either rejecting or issuing a licence.
1. Upon a prospective applicant expressing interest in operating a NBFI, the responsible officer shall explain at the pre-filing stage the requirements for obtaining a licence. During these discussions, the responsible officer shall set out all the requirements to the prospective applicant and use the discussion to determine the seriousness of the enquiry.
2. Upon the applicant submitting a formal application to the Registrar, an acknowledgement letter shall be prepared within 48 hours from the date the desk officer is assigned the application. The contents of the letter shall include the findings after checking for completeness of the application and availability of all documents and information required to facilitate evaluation of the application. This shall be before the actual evaluation.
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3. As part of the evaluation, the immediate next stage is that of initiating vetting or screening of the applicants and the proposed management team, precisely, the chief executive officer, the chief financial officer, all board directors and all shareholders who are natural persons. This is important for two reasons:
i) firstly all the effort that might go into evaluating a licence might prove futile if the applicants do not meet the "fit and proper test" regardless of how excellent all other factors maybe; and
ii) the process of vetting or screening tends to take the longest as it involves consulting other parties over whom we have no control.
The vetting or screening process comprises the following:
iii) Memorandum to Assistant Director - Security Division requesting them to establish the fitness and propriety of the persons proposed as directors or senior management by liaising with relevant authorities. This requires obtaining complete details at the time the application is submitted.
iv) A letter to the Zambia Revenue Authority enquiring whether the applicants have been paying all their tax obligations in their past work life or business dealings.
The findings under 3 above shall constitute part of the management assessment discussed subsequently.
4. Where approval to operate a NBFI is granted, the applicant will be required to pay the annual licence fee and subsequently be issued with a licence certificate. At this stage and before operations begin, an on-site check of the premises and facilities to be used shall be conducted.
5. Lastly, but not least, a gazette notice shall be published informing the general public of the newly issued licence.
3.5 Community Needs and Support
The applicant must convince the Registrar that the proposed NBFI meets a need and will, therefore, have the support of the community. Such support is vital to the long term survival and success of a NBFI because of the need for reliable "core" deposits to fund the NBFI's operations. The applicant must demonstrate that it has a strategy for attracting and maintaining community support for the new NBFI. The applicant must also demonstrate that the services to be offered will be responsive to those needs, will be convenient to customers, can be provided by the NBFI profitably, and will be consistent with the safe and sound operation of the NBFI.
3.6 Licensing of Foreign NBFI’s Subsidiaries
All other aspects of licence evaluation discussed above apply to the evaluation of an application from a foreign-owned NBFI to establish a subsidiary. However, in addition
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other factors should specifically be investigated when evaluating foreign NBFI’s applications. The main ones are that:
a) The parent NBFI/company should be of good repute in the home country. It should be under adequate supervision, applied on a consolidated basis. The banking legislation and supervision system of the parent country should meet international standards (Basle Committee minimum standards).
b) The BoZ seeks to satisfy itself that the corporate structure of which the establishment in Zambia is to form a part, is not so complicated or unclear that it frustrates the exercise of effective supervision over the foreign establishment. c) The BoZ will under all circumstances establish contact with the supervisory
authorities of the home country of a NBFI seeking establishment in a host country.
d) The BoZ will seek to establish whether the home supervisor is aware of the NBFI’s intention to set up an establishment abroad and whether the home supervisor has granted the NBFI permission to do so.
4.0 CONCLUSION
To sum it all, the following should be noted:
a) The documentation accompanying the application should contain the basic economic rationale for starting a NBFI, full information on shareholders, directors, managers and external auditors, a detailed business plan, financial projections, as well as documentation on the formation of the company such as (articles, shareholders decision etc).
b) When assessing the business plan and other aspects of the application, the BoZ considers, among other things, reasons why NBFIs fail, e.g. excessive concentration of power in one individual, excessively rapid growth, poor management, inadequate management information and control systems, including loan administration, inadequate loan review and provisioning, and excessive risk concentration (in economic sectors, geographical regions, types of assets, e.g., real estate backed loans, or individual debtors).
c) Finally, it is important to the BoZ that applicants demonstrate that they have robust internal control systems in place before starting operations.
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5.0 APPENDIX I
REQUIREMENTS FOR SETTING UP A NON BANK FINANCIAL
INSTITUTION IN ZAMBIA
INTRODUCTION
The Banking and Financial Services Act, 1994 (BFSA), gives the Bank of Zambia (BoZ) the authority to license, regulate and supervise banks and non bank financial institutions registered (NBFIs) under the referred Act. The objective of the BoZ in this regard is to ensure and promote a safe and sound financial system.
Parts 1 and 2 of Chapter II of the BFSA relate to the licensing of banks and NBFIs. These procedures focus on the licensing requirements for NBFIs.
The NBFI sector includes leasing companies, bureaux de change, microfinance institutions, building societies, as well as institutions like Development Bank of Zambia and National Savings and Credit Bank. The licensing requirements may vary slightly depending on the category of NBFI.
PART 1 1. 0 NAME CLEARANCE
1.1 A company intending to apply to operate as a NBFI shall be required to write to the Registrar of Banks and Financial Institutions (“Registrar”) submitting the proposed name of the institution for clearance.
PART 2 2.0 LICENSING REQUIREMENTS
2.1 To operate a NBFI in Zambia, it is a requirement that the institution be registered with the Registrar whose office is based at the BoZ.
2.2 The following forms, which can be accessed on-line or be collected from the BoZ, must be completed and submitted by the applicant to the Registrar at the BoZ.
(i) An application form (Form MFI) completed by the applicants of the NBFI; and
(ii) The Directors’ Questionnaires and Vital Statistics Forms filled out by prospective directors, shareholders, chief executive officer as well as the chief financial officer.
2.3 The above stated forms must be accompanied by the following:
(i) Certificate of Incorporation and Articles of Association for the company; (ii) Evidence of minimum required capital for the category of NBFI.
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a) The minimum capital requirements for NBFIs are shown in Table 1 below:
Table 1: Minimum Capital Requirements for NBFINBFIs
Category of NBFI Minimum Capital
ZMK
Development Bank 7,500,000,000
Savings and Credit Bank 2,000,000,000
Building Society 2,000,000,000
Deposit Taking Leasing Company 1,500,000,000
Non-Deposit Taking Leasing Company 500,000,000
Deposit–Taking Microfinance Institution 250,000,000
Non Deposit–Taking Microfinance Institution 25,000,000
Bureaux de change 40,000,000
(iii) Source of the initial capital to be invested and that of any future funding shall be disclosed to the BoZ
(iv) 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 NBFI. Underlying assumptions must be clearly stated in the business plan;
(v) Audited financial statements (where applicable) of the company for the year immediately preceding the application;
(vi) Curriculum vitae, including details of nationality or residence, for the senior management (i.e. proposed directors, executive officers and chief financial officer) of the proposed NBFI;
(vii) Any other documents in support of the application, as may be requested by the BoZ.
PART 3 3.0 LICENSING PROCEDURES
3.1 Application Fees
3.1.1 The applicant is required to pay the following:
(a) A non-refundable application fee of K5,400,000 payable at eh time of making the application; and,
(b) Certified copies of identities (passport or national registration card)
(c) Security screening fees for directors and senior staff are depicted in Table 2 below:
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Table 2: Security Screening Fees
Category Fee
ZMK
Clearance of Zambians based locally 50,000.00
Clearance of Zambians resident outside the country 477,400.00 Local clearance of foreigners resident in Zambia.
(All foreign nationals must submit Interpol clearance certificate from 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)
50,000.00
(d) Upon grant of a licence, pay an annual licence fee applicable to the category of NBFI and payable at the beginning of each year. Table 3 below shows the BoZ fee structure
Table 3: Bank of Zambia Fee Structure
Category of NBFI Licence
Application Fee ZMK’millions Annual Licence Fee ZMK’millions Development Banks 5.4 2.7
Savings and Credit Banks 5.4 2.7
Building Societies 5.4 2.7
Deposit Taking Leasing Company 5.4 2.7
Non-Deposit Taking Leasing Company 5.4 2.7
Deposit–Taking Microfinance Institution
5.4 2.7
Non Deposit–Taking Microfinance Institution
1 0.6
Bureaux de change 10.8 2.7
The application and licence fees may be paid by cheque or direct debit and credit clearing method or such other method as may be prescribed by the Registrar from time to time.
3.2 Processing of Application
3.2.1 Upon receipt of a complete application, the BoZ shall, within 180 days, review the application and determine whether a licence should be granted to the granted to the applicant or not.
3.2.2 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 Registrar shall inform the applicant that it has received a complete application and the stipulated days for consideration of an application referred to in 3.2.1 will commence from this date.
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(a) is fit and proper and has met all the requirements of the BFSA, Chapter 387 of the Laws of Zambia; and
(b) has met all the requirements set by the BoZ, the Registrar may then approve the application.
3.0 Appeal against decision not to award a licence
When an application has been rejected by the Registrar, the applicant may make written representations to Registrar who may then reaffirm, modify or revoke his/her decision. Where the Registrar reaffirms his decision to reject the said application, the applicant may within 7 days of receipt of the rejection appeal to the Minister of Finance and National Planning who shall appoint a three-person Tribunal to preside over the appeal. The decision of the Tribunal is final and binding on the parties except as to a point of law i.e. where the decision is in direct conflict with the law.
PART 4 4.0. Post-Licence Requirements
4.1When 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 BoZ will conduct an inspection of the premises.
4.2The premises where a NBFI is licensed to operate should meet the following minimum requirements:
a) 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 NBFI);
b) Suitable location in an area that meets the needs of the targeted clientele; c) Appropriate offices for the conduct of intended business;
d) The name of the NBFI should be prominently displayed on the building in which the NBFI is housed;
e) Telephone, facsimile and email facilities; f) Safe (s);
g) Adequate security measures e.g. electronic alarm, security guard(s), etc.; and
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PART 5 5.0. Issuance of a NBFI’s licence
5.1Upon approval of the application and payment of the annual licence fee, the Registrar shall issue the applicant with a NBFI’s licence to conduct business. 5.2When 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 NBFI.
5.3Once a NBFI is registered, it becomes subject to the supervisory powers of the BoZ as provided for in the Bank of Zambia Act and the BFSA. A NBFI is also supposed to adhere to regulatory and prudential requirements relating to reserves, capital adequacy, liquidity, restrictions on lending and exposures to insiders.
PART 6 6.0 Other Requirements
The following are some of the key requirements that NBFI are supposed to take into account:
6.1 Once licensed, the NBFI shall be subjected to regular on-site and off-site inspections;
6.2 The NBFI shall be expected, inter alia, to file monthly prudential returns;
6.3 A NBFI shall not close a branch without giving the BoZ notice, as provided for under the BFSA;
6.4 A NBFI shall not change its shareholders, directors, senior managers or its name without prior written approval from the BoZ;
6.5 A NBFI shall ensure that it has a compliance officer who shall ensure that a NBFI 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 NBFI shall also ensure that it has adequate internal anti-money laundering policies, guidelines and training programmes upon commencement of business; 6.6 A NBFI shall submit to the BoZ such other information as may be required by
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PART 7 7.0. Contact Details
Further queries relating to requirements for operating a NBFI should be addressed to the Registrar of Banks and Financial Institutions. The contact details are as follows: The Registrar of Banks and Financial Institutions
Bank of Zambia
7th Floor, Executive Building Bank Square, Cairo Road P. O. Box 30080
Lusaka, Zambia 10101
Telephone: + 260 1 226 844 Fax No.: + 260 1 237 070
Information on the requirements for setting up a NBFI is also available on the BoZ website: www.boz.zm.
