Media Wire Express Correspondent
The Bank of Tanzania (BoT) has moved to regulate loans provided by digital microfinance service providers that do not accept deposits.
This decision follows almost two years of rising concerns over the lack of regulation in online lending, which has been plagued by inadequate oversight and disorganized operations.
On August 27, 2024, the BoT released a Guidance Note aimed at setting up regulatory measures for digital lenders categorized under Tier 2 Microfinance Service Providers. According to Tanzanian microfinance laws, digital lenders are split into two groups: Tier 1, which includes microfinance banks that both accept deposits and offer loans, and Tier 2, consisting of non-deposit-taking institutions that only provide loans.
The Guidance Note, signed by BoT Deputy Governor Dr. Yamungu Kayandabila, seeks to improve the oversight of digital lending activities in the Tier 2 microfinance sector. The goal is to enforce compliance with regulations that protect financial consumers, ensuring transparency, fair pricing, responsible debt collection practices, and the protection of personal data and privacy.
“Following the release of the Guidance Note, the Bank of Tanzania instructs all Tier 2 microfinance service providers engaged in digital lending to adhere to its directives,” stated the announcement, issued on September 25, 2024.
Non-compliance could result in various penalties, such as fines, suspension of digital lending operations, and potential revocation of Tier 2 microfinance licenses. This new regulatory framework is considered a crucial step in addressing the issues posed by the rapid expansion of digital lending in Tanzania, which has so far operated with minimal regulation.
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By implementing these measures, the BoT aims to establish a safer and more transparent digital lending environment, safeguard consumer rights, and strengthen the reputation of the microfinance industry. This initiative highlights the central bank’s dedication to upholding the stability and credibility of Tanzania’s financial system amid the growing influence of digital finance.
