CHAPTER 46:10
FINANCIAL COOPERATIVES

ARRANGEMENT OF SECTIONS

   SECTION

PART I
PRELIMINARY

   1.   Short title

   2.   Interpretation

   3.   Application

PART II
LICENSING OF REGISTERED SACCOs

   4.   Prohibition against operating business without licence

   5.   Application for licence

   6.   Criteria for licensing

   7.   Issue of licence

   8.   Conditions of licence

   9.   Prohibition against transfer or assignment of licence

   10.   Expiry of licence

   11.   Suspension or revocation of licence

   12.   Revocation of licence not relief from obligations

   13.   Protection of name

PART III
CONDUCT OF BUSINESS IN CERTIFIED PREMISES

   14.   Premises certificates

   15.   Business to be conducted in certified premises

PART IV
REGISTER OF LICENSED SACCOs

   16.   Register

   17.   Publication of licensed SACCOs

   18.   Evidence of Register

PART V
PERMISSIBLE ACTIVITIES OF SACCOs

   19.   Permissible services for primary SACCOs

   20.   Permissible services for secondary SACCOs

PART VI
GOVERNANCE OF SACCOs

   21.   Directors' terms of office, meetings, responsibilities

   22.   Duties of management

   23.   No employee director in licensed SACCOs

   24.   Disclosure of fees, expenses, paid to director

   25.   Internal control systems

PART VII
REGULATION AND SUPERVISION OF SACCOs

   26.   Capital requirements

   27.   Minimum liquid assets

   28.   Additional directives for SACCOs

   29.   Other permissible investment of funds

   30.   Insider lending

   31.   Charge against shares and savings deposit

   32.   Treatment of dormant accounts

   33.   Limits on loans and credit facilities

   34.   Ownership shares

   35.   Conduct of business

   36.   Disclosure of cost of borrowing

   37.   Exhibition of financial and other information

   38.   Actions requiring approval

   39.   Amendment of by-laws

PART VIII
ACCOUNTS AND AUDIT

   40.   Financial year

   41.   Accounts

   42.   Disclosure requirements

   43.   Supervisory committee

   44.   Duties of external auditor

   45.   Qualification of external auditor

   46.   Rectification of audited accounts

   47.   Accounting records and retention

   48.   Publication and sharing of information

PART IX
REMEDIAL MEASURES AND WINDING-UP OF SACCOs

   49.   Remedial measures

   50.   Winding-up

PART X
DEPOSIT GUARANTEE FUND

   51.   Establishment of Deposit Guarantee Fund

   52.   Appointment of Board of Trustees

   53.   Composition of Board of Trustees

   54.   Powers and functions of Board of Trustees

   55.   Remuneration of Board of Trustees

   56.   Sources of Deposit Guarantee Fund

   57.   Protection of deposits

   58.   Contribution to Deposit Guarantee Fund

   59.   Deposit Guarantee Fund annual report

PART XI
MISCELLANEOUS PROVISIONS

   60.   Default by officers

   61.   Falsification of books, and other prohibited acts

   62.   Employer or agent to deduct and remit

   63.   Fee or commission for effecting deductions

   64.   Voluntary mergers

   65.   Confidentiality

   66.   Money laundering transactions

   67.   Obstruction of the Registrar and other acts

   68.   General offences and penalties

   69.   Regulations

   70.   Directives and guidelines

   71.   Voluntary membership withdrawal from SACCO

PART XII
TRANSITIONAL PROVISIONS

   72.   Transitional provisions

   73.   Compliance by existing SACCOs

8 of 2011
G.N. 5/2012

An Act to provide for the regulation and supervision of financial savings and credit cooperative societies and to make provision for matters connected therewith or incidental thereto

[1ST OCTOBER 2011]

PART I
PRELIMINARY

1.   Short title

   This Act may be cited as the Financial Cooperatives Act.

2.   Interpretation

   (1) In this Act, unless the context otherwise requires—

   “Appeals Committee” means the Financial Services Appeals Committee established under the Financial Services Act;

   “bank” has the meaning ascribed to it in the Banking Act;

   “body corporate” means a company or corporation incorporated under or by virtue of the laws of Malawi or of any other state, but does not include a corporation sole;

   “borrower” means a person who has concluded a loan agreement with a SACCO;

   “capital” includes unimpaired reserves, retained earnings, donations to a SACCO and permanent and non withdrawable shares;

   “compulsory or collateral savings” means a sum of money which is paid to a SACCO as—

   (a)   security;

   (b)   partial guarantee of a loan; or

   (c)   a precondition for a loan granted or promised to be granted at a future date to a member making the payment;

   “cooperative society” means an entity registered under the Cooperative Societies Act;

   “credit facility” means—

   (a)   the granting by a SACCO of an advance, loan or other facility which enables a member of the SACCO, or another person at the request of the member, to access funds or financial guarantees; or

   (b)   the incurring of an obligation by a SACCO on behalf of a member at the direction of the member;

   “deposit” means; money entrusted to a SACCO and accepted by it for credit to a depositor’s account, without putting up any security for the deposit;

   “director” means a member of the board of directors of a SACCO;

   “dormant account” means an account that has been kept inactive for twelve months;

   “licence” means a licence issued accordance with this Act;

   “licensee” includes a provisionally licensed SACCO;

   “national association” means an umbrella body of all financial cooperatives in Malawi;

   “officer” includes a manager of a SACCO;

   “ownership share” means an amount held by a member and established by the SACCO as the member’s ownership interest in the assets of the SACCO;

   “permanent and non-withdrawable share” means a share of a SACCO that may not be redeemable or repurchased by the SACCO;

   “person” includes an individual, a body corporate, a partnership, an association, and any other group of persons acting in concert, whether incorporated or not;

   “primary SACCO” means a SACCO the membership of which consists of individual persons and includes any body of persons approved by the Registrar of Cooperative Societies;

   “provisionally licensed SACCO” means a registered SACCO that, immediately before the coming into effect of this Act, is carrying on SACCO business;

   “Register” means the SACCO Register established and maintained pursuant to section 16;

   “Registrar of Cooperatives” means the Registrar of Corporatives as defined in the Cooperative Societies Act;

   “SACCO” means a savings and credit cooperative society registered under the Cooperative Societies Act and licensed under the Financial Services Act, whose principal object includes accepting deposits, advancing of loans, and providing other financial services to, or for, its members;

   “secondary SACCO” means a SACCO, the membership of which is restricted to primary SACCOs;

   “supervisory committee” means a supervisory committee elected by a SACCO under section 43.

   (2) Subject to subsection (1) and except where a contrary intention appears, expressions used in this Act shall have respective meanings as in the Financial Services Act.

3.   Application

   This Act shall apply in addition to the Financial Services Act, and the Cooperative Societies Act, to all persons providing member-based savings and credit services as a whole or as part of their business except to the extent that such persons are exempted by the Registrar pursuant to his authority under the Financial Services Act.

PART II
LICENSING OF REGISTERED SACCOs

4.   Prohibition against operating business without licence

   (1) No person shall engage in the business of receiving deposits, extending credit and providing other financial services to its members as a SACCO unless he is—

   (a)   firstly incorporated under the provisions of the Cooperative Societies Act; and

   (b)   licensed under the provisions of the Financial Services Act, as a—

      (i)   primary SACCO; or

      (ii)   secondary SACCO.

   (2) Any person who contravenes subsection (1) commits an offence.

5.   Application for licence

   (1) An applicant: for a licence shall submit an application in writing in a form prescribed under the Financial Services Act, and containing such information as the Registrar may specify.

   (2) An application under subsection (1) shall be accompanied by a fee as specified by the Registrar.

6.   Criteria for licensing

   (1) In considering an application for a licence, the Registrar shall, in addition to the requirements stipulated in the Financial Services Act, take into account the following factors—

   (a)   that the applicant is incorporated under the Cooperative Societies Act;

   (b)   that the applicant is a member of a national association of financial cooperates;

   (c)   the financial condition and prospects of the applicant;

   (d)   that the applicant shall be governed by a board of directors elected from within its membership;

   (e)   that the by-laws of the SACCO provide for prudent governance in accordance with cooperative principles; and

   (f)   any other matter that the Registrar may consider necessary.

   (2) A primary SACCO, or fifteen licensed primary SACCOs. in case of a secondary SACCO, shall submit to the Registrar a complete set of application for a licence

   (3) The Registrar may grant a licence to a primary or secondary SACCO upon being satisfied that the proposed business shall be financially viable.

7.   Issue or licence

   (1) The Registrar shall, within sixty days from the date of receipt of a completed application for a licence—

   (a)   grant a licence with or without conditions; or

   (b)   refuse to grant a licence.

   (2) The Registrar shall communicate his decision in writing to the applicant:

   Provided that, in case of refusal, he shall give reasons.

   (3) A person aggrieved by the decision of the Registrar may appeal to the Appeals Committee in accordance with the Financial Services Act, within thirty days after being notified of the decision.

   (4) The Appeals Committee may reverse the decision of the Registrar where—

   (a)   the Registrar failed to follow required procedures in making his decision;

   (b)   the Registrar’s decision was contrary to this Act;

   (c)   there was no factual basis for the decision of the Registrar; or

   (d)   based on a review of the record, the Registrar—

      (i)   committed a manifest error in his assessment of facts; or

      (ii)   abused his discretion in making his decision.

   (5) The Appeals Committee may, in consultation with the Registrar, specify further requirements to be fulfilled for the grant of a licence to a registered SACCO.

8.   Conditions of licence

   The Registrar may endorse on a licence granted under the Financial Services Act, such conditions as he considers necessary and may, from time to time, add, vary or substitute such conditions when deemed appropriate.

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