The purpose of this law is to promote and regulate the registration, authorisation to operate, operation and supervision of microfinance institutions (known as IMFs). IMFs are defined as commercial or not-for-profit entities dedicated in any manner to the intermediation of funds for microcredit, and the rendering of financial or ancillary services, other than those offered by banks and financial companies, and which have a minimum social capital of C$4.5 million ($176,000).
The law establishes the obligation of IMFs to request their registration and authorisation to operate to the Comisión Nacional de Microfinanzas (Conami – National Commission of Microfinance). It also establishes that other entities not defined as IMFs but which render microcredit services, may also voluntarily request their registration before Conami.
The Microfinance Law regulates certain matters of the internal organisation of IMFs, such as the type of shares that IMFs created as corporations should issue, the composition, duration and operation of the board of directors and the appointment of an internal auditor. It also establishes the activities prohibited for IMF entities, which include deducting interest in advance of the loans they provide, calculating interest rates over the total amount of the loan (only over the outstanding balance), capitalising interest to the principal (except in restructuring operations and agreed by both parties), charging penalties for early payment and collecting funds from the public.
The law also grants certain benefits to IMFs registered before Conami, such as: a) all loan contracts will be enforceable in executive proceedings (a faster judicial proceeding than an ordinary proceeding); b) no obligation to provide a surety in judicial proceedings; c) access to Conami's's Risk Central; d) access to the benefits of the microfinance promotion fund; and, e) access to studies and information created for other Conami projects.
In general terms, the law regulates the matters that should be taken into consideration by all IMFs obligated to register and also by those entities that decide to voluntarily register before Conami, to take advantage of the benefits provided in the law.
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