State institutions, at central or local level, as well as private institutions, by acting as intermediaries for credit operations, through the collection, deduction at source, processing and remittance of monthly installments of bank credit, on a periodic and permanent basis, are committing an illegal act, insofar as they are carrying out operations exclusively reserved for credit institutions (banks, micro-credits and credit cooperatives) and financial companies regulated by the Bank of Mozambique.
It is common in the Pearl of the Indian Ocean for some Public and Private Institutions (PPIs) to operate (some outside the law) as intermediaries for credit operations. This happens when, in tripartite agreements involving (i) the Financial Consumer, (ii) the Banking Institution and (iii) the Employing Entity of the Financial Consumer (EECF), they “agency” the contracting and granting of financing for the benefit of the Financial Consumer, provided that the EECF undertakes to collect the monthly installments associated with the financing, by deducting these installments at source when the salary is paid (which means collecting these installments at source, like taxes), and then channeling them to the benefit of the Banking Institution, by paying the price for the intermediation services provided.
The Banking Law (Law no. 20/2020, of December 31 – LB) continued the tradition of providing for the principle of exclusivity in the exercise of banking activity, meaning that only credit institutions and financial companies (ICSFs) can carry out professionally, on a regular basis and for profit, the activities reserved by law for ICSFs, which includes “credit operations”.
Although the Law does not establish the concept of “credit operation“, there is no doubt that it involves two temporally and logically separate phases, namely, the first phase, where the banking institution provides its services by making available/disbursing the agreed amount, and the second phase, where the financial consumer pays the installments of their financing, including principal and interest, at the agreed intervals, as consideration for the financing received. It is in these terms, and for these reasons, that IPPs, which are not licensed by the Bank of Mozambique (BoM), by intermediating credit operations, through the receipt and remittance of credit installments, violate the principle of exclusivity, since they carry out material and substantially banking operations, reserved for ICSFs.
So much so that, given the specific nature of banking operations and the need to ensure that they are carried out in a professional manner, the Governor of the BoM, by means of Notice no. 10/GBM/2020, of December 31, approved the Regulation for the Exercise of the Activity of Banking Agent, by means of which Banking Agents are authorized to carry out operations to receive repayments of credits approved by the Banking Institution. As such, any PPI receiving credit reimbursements on behalf of and for the benefit of banking institutions, without being a banking agent, is committing an illegal act, subject to sanctions under the Banking Act.
Under these conditions, is the BdM in a position to exercise its power to supervise credit operations in Mozambique to the fullest extent?
