Registered Mandates: A Crucial Tool in South Africa’s Microfinance Sector
In South Africa’s fast-evolving financial services sector, microfinance institutions (MFIs) play a vital role in extending credit
to underserved and low-income communities. However, with this opportunity comes the responsibility to operate transparently,
ethically, and within the law. This is where Registered Mandates (RMs) come in, as a critical mechanism that supports secure,
compliant, and consumer-friendly debit order processes.
Let’s unpack what Registered Mandates are, how they work, and why they’re so important to the microfinance sector.
What is a Registered Mandate?
A Registered Mandate is a formal agreement between a consumer and a service provider (like a credit provider or collections agent), allowing the provider to debit the consumer’s bank account according to agreed terms. These agreements must comply with South African regulations, specifically the National Credit Act (NCA) and guidelines from the Payments Association of South Africa (PASA).
Registered Mandates can take a few forms:
- Electronic (authernicated digitally using secure platforms)
- Paper-based (good old-fashioned ink and paper)
- Voice Recorded (Subject to specific regulatory requirements)
Under the RM framework, a service provider can instruct a consumer's bank to process a debit order. Even though the new RM system doesn’t require customer authentication (unlike DebiCheck), the mandate still needs to be registered and clearly communicated to the customer, including key details like the abbreviated name, contract reference, and contact info.
RM vs RMS – What Changed?
Until recently, we had the RMS (Registered Mandate Service) in place. RMS was introduced by the
South African Reserve Bank (SARB) as a temporary solution for processing unauthenticated DebiCheck debit orders.
It essentially acted as a fallback when customers didn’t respond to authentication requests.
On 12 May 2025, RMS was officially phased out and replaced by the new RM (Registered Mandate) payment rail.
The new RM system retains similar functionality but improves efficiency and standardization, making it the default mechanism for
processing unauthenticated mandates.
How Does the RM System Work?
The Registered Mandate system supports two main pathways:
- Fallback from Debicheck: If a customer doesn't authenticate a DebiCheck mandate in time, the system can fall back to an RM.
- Direct RM Initiation: A business can initiate an RM without first attempting DebiCheck authentication.
Although RM doesn’t require consumer authentication, it does require the mandate to be registered and the consumer to be notified by their bank.
Additionally, the RM system allows tracking of the customer’s bank account for up to 10 days after the action date, improving collection reliability for service providers.
Why Registered Mandates Matter in Microfinance
In the world of microfinance, where loans are typically small, short-term, and unsecured, Registered Mandates are more than just paperwork. They’re an essential risk management and compliance tool that supports:
-
- Enforcing Repayment Agreements:
They provide a legally binding mechanism to collect repayments with the borrower’s consent. -
- Reducing Defaults:
With predictable payment arrangements, MFIs can better manage repayment cycles and reduce late or missed payments. -
- Staying Compliant:
By following the proper mandate process, MFIs align with the NCA and PASA requirements, protecting themselves and their clients from legal and reputational risks. -
- Building Trust:
Transparent, well-documented mandates show borrowers that they’re dealing with a reputable institution, crucial in communities where mistrust of formal financial institutions can run high.
Who Regulates It All?
Several key regulatory players help ensure Registered Mandates are used responsibly:
-
National Credit Regulator (NCR):
Oversees responsible lending practices and the registration of credit providers. -
PASA (Payments Association of South Africa):
Manages the payment system and debit order rules, including DebiCheck and RM.. -
Financial Sector Conduct Authority (FSCA):
Ensures fair treatment of consumers and responsible conduct by financial institutions.
For MFIs, this means:
- Getting clear, informed consent from borrowers.
- Communicating the terms (amount, duration, frequency) transparently.
- Keeping proper records for audits and legal reviews.
Challenges (and the Opportunities That Come with Them)
Let’s face it, no system is perfect, and Registered Mandates have their challenges:
- Consumer Education: Many borrowers don’t fully understand what they’re agreeing to, making education critical.
- Misuse: Unscrupulous lenders have been known to exploit vague or hidden mandate clauses.
- Tech Gaps: Smaller MFIs might lack the infrastructure for secure mandate processing or digital systems.
But here’s the upside: FinTech is stepping in with innovative solutions like biometric verification and mobile consent tools. These technologies can simplify the process for borrowers while helping MFIs stay compliant and competitive.
Final Thoughts
As South Africa’s microfinance sector grows, Registered Mandates will remain a cornerstone of responsible,
sustainable lending. They protect consumers, streamline operations, and help MFIs stay on the right side of the law.
In short? Registered Mandates aren’t just about processing payments, they’re about
building trust, ensuring compliance, and empowering financial inclusion.
Contact ACPAS for details
Get in touch with us today to learn more about our automated Loan Management System (LMS), featuring built-in debit solutions. ACPAS can help you streamline customer management and simplify payment collections.
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