Regulatory Framework Assessment for Financial Institutions in Mozambique
| dc.date.accessioned | 2025-06-04T17:12:35Z | |
| dc.date.available | 2025-06-04T17:12:35Z | |
| dc.date.issued | 2024-12 | |
| dc.description | This paper is an assessment of regulations that are directly impacting lending activities for under-served segments of the population in Mozambique. It is targeted to donors, regulators as well as, more broadly, key decision-makers in the finance space in Mozambique that will need to take informed decisions on how to modernize the regulatory framework for MSME lending in the country to allow financial intermediaries to increase outreach while mitigating risks. The document takes an in-depth look at key regulatory provisions in both the traditional finance space (e.g. banks, microbanks, cooperatives) as well as in the alternative finance space (e.g. finance companies). When it comes to banks and other regulated credit providers, Mozambique has a solid regulatory framework based on international banking standards. This has the advantage of protecting depositors but, at the same time, it leaves regulated players with little room to innovate, particularly on the lending side. The need of respecting Basel II provisions such as minimum capital adequacy ratio limits and minimum provisioning requirements are significant disincentives for all Mozambican regulated financial intermediaries to lend to under-collateralized segments of the economy such as micro, small and medium enterprises operating in the informal sector, women-entrepreneurs and youth. However, law 20/20 gives BdM the option of moving away from its “one size fits all” approach and craft tailored prudential limits according to the typology of institution supervised, which could open an opportunity to introduce less stringent provisioning rules for non-systemic lenders. High reserves and liquidity requirements as well as the impossibility of using cloud-based core banking systems also add to the complexities of smaller intermediaries (e.g. microbanks, finance companies) preventing them from injecting liquidity into the system and boost innovation. The regulatory framework for alternative finance also needs improvement. The creation of a Sandbox for start-ups has not been accompanied by the creation of a full-fledged environment to foster innovation in the MSME lending space which shall include an open banking framework and clear rules for digital lenders, including crowdfunding platforms. While venture capital is regulated as part of law 20/20, tax incentives to attract retail investors and asset allocation targets for pension funds are needed to boost investments in promising Mozambican start-ups. | |
| dc.description.sponsorship | USAID SPEED | |
| dc.identifier.uri | https://repositorio.up.ac.mz/handle/123456789/356 | |
| dc.language.iso | en | |
| dc.title | Regulatory Framework Assessment for Financial Institutions in Mozambique | |
| dc.type | Technical Report |
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