Microfinance in Tanzania is a dynamic sector that continues to evolve; it performs an important function in broadening monetary entry to people and companies that lack conventional banking companies, not least ladies entrepreneurs. Non-deposit taking microfinance service suppliers have expanded their attain, providing tailor-made monetary options and thereby empowering Tanzania’s underserved communities.
Recognising the necessity for stronger oversight and adaptableness, the Microfinance (Non-Deposit Taking Microfinance Service Suppliers) Rules of 2025 (the 2025 Rules) have been drafted to exchange the 2019 Rules. The 2025 Rules (which, as of the date of this updater, are nonetheless in draft kind awaiting enter from stakeholders), introduce a extra structured and inclusive regulatory framework. They intention to reinforce transparency, accountability, and monetary stability inside the sector, guaranteeing sustainable development whereas fostering accountable lending practices.
Beneath, we spotlight the important thing adjustments launched within the 2025 Rules.
Key phrases
The next are phrases used on this article:
“Act” means the Microfinance Act No. 10 of 2018 (as amended);
“Credit score reference bureau” means an entity specialised in assortment and sale of credit score efficiency info for people and entities as outlined beneath the Act;
“International owned microfinance service supplier” means a microfinance service supplier integrated in Tanzania and whose majority homeowners or shareholders are foreigners as outlined beneath the Act;
“Microfinance enterprise” means the deposit and non-deposit taking enterprise, together with the actions stipulated beneath Part 4 of the Act;
“Non-deposit taking microfinance service suppliers” means monetary establishments that supply microfinance companies, resembling small loans, with out accepting deposits from the general public
Key provisions beneath the 2025 Rules:
Software for licence
Regulation 6 simplifies the licensing course of by eradicating the requirement for foreign-owned microfinance service suppliers to submit a coaching plan and succession plan, as was required within the 2019 Rules.
Integrity evaluation
Regulation 7 broadens the integrity evaluation for candidates who’re making use of for a non-deposit taking microfinance licence. Beforehand targeted on shareholders or proprietors of the corporate, the 2025 Rules now prolong to companions and trustees within the analysis course of. The Financial institution of Tanzania (the BoT) can even think about studies from credit score reference bureaus and different related sources to evaluate the integrity of the proposed shareholders. This goals to strengthen due diligence, guaranteeing larger transparency and accountability inside the sector.
Monetary capability
Regulation 8 simplifies the BoT’s analysis of an applicant’s monetary capability by focusing solely on the capital place as mirrored within the applicant’s monetary assertion or financial institution assertion. It is a shift from the earlier strategy, which thought-about broader elements like internet value, monetary assist, and the supply of possession financing. The 2025 Rules narrows the factors, making the analysis extra streamlined, guaranteeing that the monetary evaluation is obvious and easy for each the applicant and the BoT.
Chief Government Officer (CEO) and board adjustments
The 2025 Rules, beneath Regulation 11, require that non-deposit taking microfinance service suppliers get hold of prior approval from the BoT earlier than appointing a CEO or any members of the governing physique. Moreover, they need to submit a accomplished questionnaire, as specified within the fourth schedule to the 2025 Rules, to the BoT for overview. This course of ensures that the BoT can assess the suitability of key personnel, strengthening oversight and accountability inside the sector.
Willpower of the appliance
The 2025 Rules beneath Regulation 12, have enhanced the method for figuring out licensing purposes for non-deposit taking microfinance service suppliers. Candidates at the moment are given a 60-day window to adjust to all utility necessities. If the necessities usually are not met inside this era, the BoT will cancel the appliance. This alteration ensures a extra environment friendly and well timed licensing course of, selling readability and accountability for candidates.
Transferability of the licence
Regulation 13 introduces a big change by explicitly prohibiting the switch or task of a licence issued to a non-deposit taking microfinance service supplier. This ensures that the licence stays with the unique supplier, selling higher regulatory management and accountability.
Closure of microfinance enterprise
The 2025 Rules present a transparent and structured course of for each non permanent and everlasting closures of non-deposit taking microfinance companies as follows:
Momentary closure
In line with Regulation 15, non-deposit taking microfinance service suppliers that plan to briefly shut their operations for as much as six months should: present a 30-day discover to prospects and workers; allow present debtors or collectors to proceed servicing their money owed; and preserve periodic studies to the BoT all through closure. The BoT could revoke the licence if the enterprise stays closed for greater than 6 months with out notification.
Everlasting closure
For everlasting closures, non-deposit taking microfinance service suppliers should, along with the notification necessities, discharge, deregister, and return all collateral pledged by debtors as soon as their excellent obligations are absolutely settled, or switch the collateral if the portfolio is transferred to a different lender; settle all statutory obligations and pending liabilities; and set up formal agreements with collectors for obligations that will likely be settled after the enterprise closure.
Publish closure actions
Regulation 18 outlines the post-closure actions for non-deposit taking microfinance service suppliers. After closing their operations, companies should chorus from partaking in any microfinance actions. They’re permitted to gather or switch excellent loans for a interval of as much as three months. Moreover, there’s an obligation requiring buyer knowledge to be securely dealt with in accordance with the Private Information Safety Act No. 11 of 2022 to make sure privateness and compliance.
Give up of licence
Regulation 17 mandates all non-deposit taking microfinance service suppliers which have ceased operations or have had their licences revoked, to give up their licence to the BoT inside fourteen days. This have to be completed in spite of everything money owed are settled and collateral is returned to prospects, guaranteeing that each one monetary obligations are correctly addressed earlier than the enterprise can formally shut.
Permissible actions
Regulation 26 introduces adjustments to the actions that non-deposit taking microfinance service suppliers are permitted to conduct. Some actions that had been beforehand permitted, resembling sustaining numerous financial institution accounts, and fairness investments, have now been excluded. Nevertheless, the 2025 Rules enable non-deposit taking microfinance service suppliers to behave as brokers for cell cash operators, which was not beforehand permitted.
Minimal capital necessities
Regulation 48 introduces a distinction in minimal capital necessities primarily based on possession. Non-deposit taking microfinance service suppliers with majority overseas possession should have a minimal capital of Tanzanian Shillings (TZS) 500 million, whereas these with majority native possession nonetheless want at the very least TZS 20 million. International-owned microfinance service suppliers in operation earlier than the 2025 Rules have a 12-month grace interval to adjust to these provisions.
Minimal liquid belongings
Regulation 49 requires non-deposit taking microfinance service suppliers to keep up minimal liquid belongings of at the very least 1% of their complete excellent gross loans, down from the earlier 5% of complete belongings. Liquid belongings embrace authorized tender, financial institution balances (excluding money collateral), and unencumbered treasury payments and bonds.
Administration takeover
Regulation 53 outlines the precise grounds beneath which the BoT can take over the administration of a non-deposit-taking microfinance service supplier, together with poor monetary well being, failure to stick to threat administration insurance policies, or working opposite to the legislation. Beneath the 2025 Rules, the BoT is remitted to handle such suppliers with diligence and in accordance with sound company governance ideas. Inside 60 days of taking possession, it should stock the supplier’s belongings and liabilities, assess its capital construction, and decide whether or not restructuring, reorganization, or liquidation is important. Moreover, shareholders lose their rights to their shares until the BoT decides in any other case.
Conclusion
The 2025 Rules supply a extra structured and inclusive framework in comparison with the 2019 Rules. Because the microfinance sector continues to develop and develop, so too will the necessity for it to be appropriately regulated. Nevertheless, if the alternatives are correctly harnessed, microfinances may have a big influence on Tanzania’s long-term financial improvement, serving for example for the remainder of the world.
Please contact Tenda Msinjili ought to you have got any questions.
