Taxation of Microfinance Institutions

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Microfinance > Best Practices > Taxation of Microfinance Institutions

Taxation of Microfinance Institutions
BCD OCANSEY, Manager, Ghana, Member
I have been thinking about whether microfinance enterprises - i.e. companies and business organisations that give small loans to the poor to finance their businesses - should pay tax. Why should they pay or not pay tax? If they should, how much tax should they pay? Should they be given any tax incentives? I'd like some members to share experiences in other countries. Thank you... (...) Read more? Sign up for free

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  Mincrofinance Institutions (MFI) Should not Be Taxed
Charles Tanyi, Student (Other), Cameroon, Member
  In Cameroon they are taxed. Indeed, it is the poor who are being taxed, because the taxes are incurred by clients when they pay for the service the MFI provides to them.
This is the paradox. MFIs shoud actually be alleviating poverty. Unfortunately, the loans they give to the poor are heavily taxed and the very purpose of the loan is defeated.
No doubt, MFIs provide loans to the poor which they otherwise would not get from classical banks. Yet, the expected results are difficult to obtain because in the final analyses, the loans are more expensive than those granted by banks.
I hold therefore that MFIs should not be taxed if they are to meet a major objective which is poverty alleviation for the masses.

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