Microlending is a regulated financial activity in Botswana. Any business intending to provide short-term or small-value loans to the public must obtain a Microlending Licence from the Non-Bank Financial Institutions Regulatory Authority (NBFIRA). Operating without a licence is unlawful and attracts penalties, including closure of the business.
This article outlines the key requirements before applying, the licensing process, and the ongoing obligations of licensed microlenders.
1. Regulatory Framework
Microlenders in Botswana are regulated under:
- The NBFIRA Act
- The Micro Lending Regulations
- Related consumer protection and AML/CFT laws
NBFIRA is responsible for licensing, supervision, inspections, and enforcement within the microlending sector.
2. What You Must Have Before Applying
NBFIRA only licenses fully established and compliant businesses. The following must be in place before applying:
Registered Company
- A legally registered company with CIPA
- Trusts are not eligible to be licensed as microlenders
Tax Compliance
- Registration with BURS
- A valid Tax Clearance Certificate (TCC) is mandatory
- Foreign-owned companies: foreign directors/shareholders must hold valid residence permits before BURS can issue a TCC
Physical Office
- A non-residential, physical office suitable for client service and regulatory inspections
- Home offices are not permitted
Bank Account and Minimum Funds
- Active company bank account
- Proof of minimum financial liquidity as prescribed by regulation
Fit and Proper Management
- Directors, shareholders, and the proposed Principal Officer must be vetted
- Police clearance, CVs, and personal declarations are required
3. Licensing Requirements and Application Process
Applicants must submit a complete application to NBFIRA, including statutory documents, financial information, and operational readiness evidence. Applications are assessed on both legal compliance and practical capability.
Mandatory Operational Policies
The application must be accompanied by the following core operational policies and documents:
- Loan Underwriting / Credit Policy
Outlines how borrowers are assessed, affordability checks, and loan approval processes. - Bad Debts and Delinquency Policy
Governs handling of non-performing loans and penalties, which may not exceed 5% per month of the outstanding principal, with a cap equal to the principal amount. - Complaints Handling Policy
Explains how customer complaints are received, resolved, timeframes involved, and escalation to NBFIRA where necessary. - AML/CFT Policy and Procedures
Sets out customer due diligence (KYC), internal controls, reporting mechanisms, and staff training in compliance with the Financial Intelligence Act. - Standard Loan Agreement
The contract to be used with clients, clearly disclosing loan terms, interest, fees, penalties, and repayment schedules. - Spousal Consent Form
Required for borrowers married in community of property, as prescribed by the Microlending Regulations.
These policies demonstrate the applicant’s ability to operate responsibly, protect consumers, and comply with financial crime regulations.
4. Obligations After Licensing
Acceptable Practices
Licensed microlenders must:
- Display their licence prominently at business premises
- Conduct proper affordability assessments
- Disclose loan terms transparently
- Maintain accurate financial and loan records
- Submit to NBFIRA inspections and reporting requirements
Prohibited Practices
Licensed microlenders may not:
- Confiscate identity documents, bank cards, or PINs
- Use misleading or aggressive advertising
- Apply unlawful penalties or charges
5. Licence Validity and Enforcement
- Licences are issued for a fixed period and must be renewed before expiry
- Operating with an expired or cancelled licence is an offence
- NBFIRA may suspend, cancel, or refuse renewal where compliance failures occur
Conclusion
Microlending in Botswana is not a casual business—it is a regulated financial service requiring proper legal setup, tax compliance, operational systems, and consumer safeguards. Businesses must be fully compliant before applying, particularly in relation to tax clearance, office premises, and immigration status for foreign owners.
A well-prepared application, supported by compliant policies and procedures, significantly increases the likelihood of approval.
