Tanzania: The Microfinance Act 2018

Last Updated: 10 January 2019
Article by Peter Kasanda, Michaela Marandu and Tenda Msinjili

In this month's legal briefing, we focus on the Microfinance Act 2018 and recent public notices issued by the Bank of Tanzania on Supervision of Microfinance Service Providers.

BOT's Notice

In December 2018 the Bank of Tanzania (BOT) issued a public notice (the Notice) stating that it is preparing regulations for various categories of microfinance service providers (MFIs) identified in the Microfinance Act 2018 (the Act), and for licensing purposes. Furthermore, the Notice required MFIs to submit to BOT certain information regarding their business before 11th January 2019. On 5th January 2019 BOT revised the Notice to extend the deadline to submit information to 31st January 2019 and exempt Savings and Credit Cooperative Societies (SACCOS) from complying with the Notice.

The following information must be submitted to BOT as guided by the Notice:

  1. Certificate of Incorporation
  2. Business License issued by Business Registration and Licensing Agency
  3. Place of business and contract details
  4. List of owners, Board of Directors, Chief Executive Officer and their respective citizenship
  5. All types of microfinance service products offered
  6. Statement whether the business is audited annually or not
  7. Description of accounting system and information and communication technology in use
  8. Financial statement details on total assets, total liabilities and owners' equity.

The Notice does not specify what measures will be taken by BOT if a person operating microfinance business fails to submit to BOT the information as required by the Notice.

Key legislative highlights in the Act

Following our previous legal update in November 2018 on the Microfinance Bill, the Act was passed into law on 16th November 2018 and was assented by the President on 21st November 2018. As of the date of this legal briefing, we understand that a publication of the commencement notice will be issued in order for the Act to become operational.

Highlights Summary and comments
Section 2: Scope of application

This section provides that the Act shall apply to Mainland Tanzania only. Notably, this is a departure from other legislation in the financial sector which apply across both Mainland Tanzania and Zanzibar.

Clarification may need to be sought from the BOT or Ministry of Finance on whether there will be similar legislation passed to regulate MFIs in Zanzibar.
Section 4: Microfinance business

This section provides a comprehensive definition for the term microfinance business to include receiving money by way of deposits or borrowing, providing micro credit, micro savings and micro insurance services, as well as providing loans and credit facilities to small enterprises and low income households.

The aim is to capture all formal and informal micro credit / finance service providers without exception.
Section 5: Categorization of microfinance services

The Act stipulates that there shall be four tiers of MFIs:

  • Tier 1 is comprised of deposit taking MFIs;
  • Tier 2 is comprised of non-deposit taking MFIs such as individual money lenders;
  • Tier 3 is comprised of SACCOS; and
  • Tier 4 is comprised of community microfinance groups.
This categorisation allows BOT to regulate institutions and/or individuals based on the nature of their microfinance business and their respective financial capacity.
Part III: Administrative provisions

Part III empowers BOT to supervise and regulate MFIs. These powers extend to issuing or revoking licences, evaluating the performance of MFIs and protecting consumers from malpractice in the sector.

In fulfilling its statutory duties, BOT has the mandate to investigate microfinance operations, inspect books of accounts and other records. Additionally, so long as it is within reason, BOT can access strong rooms and safes in order to retrieve information required to perform its regulatory responsibilities.
Licensing of Tier 1 microfinance service providers to be under the Banking and Financial Institutions Act 2006

Section 5(2) of the Act stipulates that Tier 1 MFIs shall be regulated in accordance with the Banking and Financial Institutions Act 2006 (BFIA). This is due to the deposit taking nature of Tier 1 MFIs which requires closer monitoring by BOT.

There already exists the Banking and Financial Institutions (Microfinance Activities) Regulations 2014 which were amended in 2015, therefore it would appear that licensing of Tier 1 MFIs will be regulated under these regulations unless BOT subsequently issues new regulations under the BFIA.
Part IV: Licensing of Tiers 2 and 3 microfinance service providers

Part IV lays out the procedure for application for a licence and registration of MFIs under Tiers 2 and 3.

Consequently, Part IV prohibits operating a microfinance business without a licence. Contravening this provision attracts fines of up to TZS 100 million or imprisonment of up to five years or both, depending on the category of the MFI.
Part V: Licensing of Tier 4 microfinance service providers

Part IV lays out the procedure for application for licence and registration of MFIs under Tier 4. Licensing of Tier 4 MFIs may be done by BOT or a delegated authority as may be prescribed by the regulations.

BOT has yet to issue regulations under the Act; the regulations may shed some light on which delegated authority shall be designated for this purpose.
Section 43: Sharing of credit information This provision of the Act requires MFIs to provide the BOT as well as the credit reference bureau with credit information on customers. MFIs will be able to access this database to analyse the creditworthiness of a borrower; which may benefit them in terms of reducing non-performing loans.
Section 50 and 51: Consumer protection and debt collection and recovery

MFIs are required to ensure utmost transparency and fairness throughout a transaction with a customer. This includes:

  • instilling complaints handling and dispute resolution mechanisms;
  • upholding the rights and interests of consumers;
  • educating consumers;
  • vetting standard contracts;
  • full-disclosure of relevant information on products and services, including interest rates, fees or penalties; and
  • disposing of property of a debtor (or any relevant collateral) as a final resort.
Section 52: General penalty for offences Breaching a provision in the Act, (other than those with specific penalties), attracts a fine of up to TZS 20 million or imprisonment of up to five years or both, depending on the category of the MFIs.
Part X: Consequential amendments of other laws

Part X provides for amendments to certain banking and finance sector laws so that they are in line with the Act. The following laws have been amended by the Act:

  • the Banking and Financial Institutions Act (Cap. 342)
  • the Bank of Tanzania Act (Cap.197)
  • the Cooperative Societies Act (Cap. 211)

Other noteworthy provisions in the Act

  • Existing MFIs must apply for the relevant licence and register within 12 months of commencement of the Act.
  • BOT may delegate to another public institution (delegated authority) some of its powers and functions under the Act.
  • The Act subjects MFIs to minimum capital adequacy regulations.
  • The Act requires MFIs to comply with the Anti-Money Laundering Act 2006.
  • The Act requires MFIs to comply with applicable laws on local content including employment and training of Tanzanians.
  • Tier 4 MFIs to be exempted from certain provisions of the Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions