Bank of Tanzania moves to rein in digital lenders

Bank of Tanzania moves to rein in digital lenders

Dar es Salaam. The Bank of Tanzania (BoT) has taken decisive action to regulate loans issued by non-deposit-taking digital microfinance service providers.

This initiative comes in response to nearly two years of escalating concerns regarding online loans, which have been marked by inadequate oversight and poorly structured operations.

In this context, the BoT issued a Guidance Note on August 27, 2024, aimed at regulating digital lenders classified under Tier 2 Microfinance Service Providers.

Tanzania’s microfinance legislation categorises digital lending into two tiers: Tier 1 encompasses microfinance banks that accept deposits and issue loans, such as Finca, while Tier 2 consists of non-deposit-taking microfinance institutions that solely provide loans without accepting deposits.

According to a statement signed by BoT Deputy Governor, Dr Yamungu Kayandabila, the Guidance Note seeks to enhance the supervision of digital lending practices within Tier 2 microfinance service providers.

It aims to ensure compliance with financial consumer protection regulations, which include transparency, pricing, debt collection practices, and the safeguarding of personal data and customer privacy.

“Following the issuance of the Guidance Note, the Bank of Tanzania directs all Tier 2 microfinance service providers engaged in digital lending to comply with its requirements,” the statement, released on September 25, 2024, indicated.

Noncompliance may result in administrative sanctions, including penalties, suspension of digital lending activities, and the potential revocation of microfinance Tier 2 licenses.

Mr Deogratias Mnyamani, Principal Officer from the Directorate of Financial Sector Management, elaborated on the Guidance Note, stating that these guidelines were developed in response to the oversight challenges associated with online loans, which have increasingly become problematic.

He emphasised that digital loans must adhere to established procedures, as mandated by the Microfinance Act, which requires that all small financial activities be licensed by the BoT.

“Regrettably, many online lending operations either disregard these regulations or operate without the necessary licenses. Individuals can easily create applications to offer loans, while licensed providers often fail to meet compliance standards. This has led to a distortion of consumer protection measures, resulting in contracts that lack transparency, unclear repayment schedules, and ambiguous late fees,” he remarked.

Mnyamani further noted that borrowers are sometimes pressured to repay a three-month loan within a mere seven days, risking humiliation should they fail to comply.

This lack of transparency and procedural violations not only jeopardise consumer rights but also undermine individuals’ dignity.

Currently, there is no available data regarding the number of Tier 2 digital lenders operating in the country.

“This is why we have directed them to come forward and identify themselves, enabling us to recognise their operations,” he stated. Mnyamani highlighted that the loans offered by these institutions are not guided, relying solely on their capacity to provide loans ranging from hundreds to millions.

Through these new regulations, the Bank of Tanzania aims to foster a more secure and transparent environment for digital lending, ultimately protecting consumers and enhancing the integrity of the microfinance sector.

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Tanzania: Samia Hands Over NBC’s 354m/ – Crop Insurance Compensation to Farmers Affected By Hailstorms
Tanzania Foreign Investment News
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Tanzania: Samia Hands Over NBC’s 354m/ – Crop Insurance Compensation to Farmers Affected By Hailstorms

President Samia Suluhu Hassan, has handed over a cheque of 354m/- from the National Bank of Commerce (NBC) as compensation to tobacco farmers, who were affected by hailstorms during the previous farming season in various regions across the country.

Handing over the cheque in Dodoma, the compensation is part of the crop insurance service provided by NBC in collaboration with the National Insurance Corporation (NIC).

Furthermore, President Samia has also handed over health insurance coverage to members of the Lindi Mwambao Cooperative Union based in Lindi Region, through the Farmers’ Health Insurance service provided by the bank in partnership with Assurance Insurance Company.

While visiting the bank’s pavilion at the Nanenane Agricultural Exhibition and being received and briefed by the bank’s Managing Director, Mr. Theobald Sabi, she said: “This crop insurance is one of the crucial solutions in ensuring farmers have a reliable income, without fear of challenges such as natural disasters, including hailstorms.

“I call upon all farmers in the country to make the best use of this important opportunity by accessing these kinds of insurance services. I also highly commend NBC and all the stakeholders participating in this programme.”

Elaborating further on the crop insurance service, the Minister of Agriculture, Hussein Bashe, stated that it will help to recover the loss farmers incurred, especially in various calamities beyond their control.

Citing them as floods, fires, and hailstorms, which have significantly affected the well-being of farmers and caused some to be reluctant to invest in the crucial sector, Mr Bashe added: “However, our President, this step by NBC is just the beginning, as this is the second year since they started offering this service, and the results are already visible.

“As the government, we promise to continue supporting the wider implementation of this service, with the goal of ensuring that this crop insurance service reaches more farmers.”

ALSO READ: NBC participates in TFF 2023/24 awards, promises to enhance competition

On his part, Mr Sabi said that the farmers who benefited from the compensations are from 23 primary cooperative unions in the regions of Shinyanga, Geita, Tabora, Mbeya, Katavi, and Kigoma.

He added: “In addition to these insurance services, as a bank, through this exhibition, we have continued with our programme of providing financial education and various banking opportunities to farmers, alongside offering them various loans, including loans for agricultural equipment, particularly tractors, to eligible farmers.:

At the NBC booth, President Samia also had the opportunity to be briefed on the various services offered by the bank to the farmers namely crop insurance and health insurance services.

There, the President had the chance to speak with some of the beneficiaries of the services, including the Vice-Chairman of the Lindi Mwambao Primary Cooperative Union, Mr. Hassan Mnumbe, whose union has been provided with a health insurance card from the bank.

Source: allafrica.com

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