Tanzania’s central bank bans unlicensed loan apps with new directive

May 14, 2024
2 min read
Bank of Tanzania

The news: 

  • The Bank of Tanzania (BOT), the apex bank of the East African country, has issued a new directive that will henceforth prohibit unlicensed digital lenders from operating in the country. 
  • Reports indicated that the new BoT restrictions are connected to unethical lending practices, such as ballooning interest rates and threats and debt-shaming of defaulting customers, which have become rampant in Tanzania and across Africa.
  • The central bank warned Tanzanians to exercise caution and ensure that loan companies have valid licences before doing business with them, or they will be left unprotected. 

“The General Public is hereby reminded to review the loan agreement to be entered, including understanding and agreeing to the loan terms and conditions, and be satisfied that the lender has a valid license issued by the Bank of Tanzania,” BoT cautioned. 

​Over 100 unregistered loan apps provide instant access to loans to up to 30% of Tanzania's adult mobile phone users who do not have a regular income.

Rather than dealing with approved traditional financial institutions such as banks, savings and credit cooperatives (SACCOs), and cooperative societies, many Tanzanians prefer these dubious platforms due to the low cost of obtaining loans. 

While the new ban is designed to protect vulnerable customers, it is expected to impact the country's financial inclusion. It’s still unclear how the central plans to turn the customers who prefer the low-requirement options of dodgy loan apps. 

“In accordance with Section 16 (1) of the Act [Microfinance Act 2018], it is an offence to engage in the business of lending without a valid license. The prohibition to engage in lending business without a license includes the provision of loans through various platforms, such as digital loans,” the BoT release read partly. 

Moving forward, as part of the BoT reforms, all licenced platforms must issue borrowers signed loan agreements that include all terms and conditions, such as total loan fees, interest rates, and rollover fees for late payments. 

Customers can access loans by clicking a button, so loan apps do not currently provide detailed terms and agreements.

Tanzania isn’t the only African country that has decided to prohibit unregistered loan platforms. Kenya has banned over 100 unlicensed digital credit providers, reducing the number to 50. In September 2023, Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC) delisted more loan apps from the Google Play Store.

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