BUUMBA CHIMBULU writes
A PROJECT to modernise the Money Lenders Act in promoting integrity in the sector is currently being worked on by the Bank of Zambia (BoZ) and the Ministry of Finance.
This is also meant to enhance the regulatory and supervisory role of the regulator, says Acting Assistant Director Communications, Ms Besnat Mwanza.
Ms Mwanza explained that the revised Act would provide clarity on permissible activities for money lenders.
According to the ZamBanker Journal, Ms Mwanza said the Act would also promote consumer protection which was currently a challenge due to the inadequacies in the existing law.
The current Act predates pre-Independence days for Zambia (August 1938).
Ms Mwanza denounced unlicensed entities that are carrying monetary transactions but are not registered and regulated either by the Central Bank or any other recognised regulating body.
“The BFSA is very categorical under section 157 concerning individuals that engage in money circulation schemes and it reads as follows: “(1) A person shall not—conduct, or participate in, a money circulation scheme; or issue a notice, circular, prospectus, proposal or other document inviting the public to subscribe to a money circulation scheme. (2) A person who contravenes subsection (1) commits an offence and shall be liable, upon conviction, to an administrative penalty as specified in this Part”, she warned.
Ms Banda also said one way to describe illegal money lenders was to visualise the pyramid structure; where at the tip, one person registered into an institution running the scheme.
This person, she explained, was required to mobilise 10 subscribers and the institution returns to the first investor the investment plus some additional amount from the collections received from each new recruit of investors.
“As the scheme enlarges and gets closer to the base of the pyramid, a situation would come in where there would be no further prospective investors and it breaks the chain and money flow gets disturbed and the last level of investors would lose their investments,” Ms Banda said.
Other financial service regulators include the Ministry of Finance, which administers the Money Lenders Act and the Ministry of Commerce which has oversight over the financial cooperatives and credit unions.