Introduction of Tanzania’s Benefit Entitlements Regulations

The Social Security Schemes (Use of Member’s Benefit Entitlements as Collateral for Home Mortgage) Regulations Government Notice No. 140 of 2024 (the Benefit Entitlements Regulations), establish a framework allowing members of social security schemes in Tanzania to leverage their benefit entitlements as collateral for home mortgages. The Benefit Entitlements Regulations aim to facilitate eligible members' access to housing financing while ensuring the prudent management of social security funds. In this legal update, we highlight key provisions of the Benefit Entitlements Regulations enacted on 08 March 2024, under section 38 of the Social Security Act [Cap 135 R.E. 2018].

Key definitions

The following are some terms that have been defined under the Benefit Entitlements Regulations:

• “Division” means the Division responsible for social security within the Ministry responsible for social security matters;
• “eligible member” means a member who has made at least one hundred and eighty months contributions of which twelve month’s contributions are made prior to the date of issuance of collateral;
• “Fund” has the meaning ascribed to it under the respective scheme’s law being the Public Service Social Security Fund established under the Public Service Social Security Fund Act and the National Social Security Fund established under the National Social Security Fund Act;
• “home mortgage” means a loan granted to an eligible member to acquire, construct, or improving a residential house which has been secured by the said house as the first collateral;  
• “institution” means banks and financial institutions registered and licensed under the Banking and Financial Institutions Act, 2006;
• “member” means an employee or worker registered by a scheme and includes a person entitled to or receiving a benefit under a scheme; and
• “operational manual” means the internal document of the Fund containing operational processing and granting of collateral of a mortgage under the Benefit Entitlements Regulations.

Assignment of benefits as collateral

Under the Benefit Entitlements Regulations, members can assign a portion of their benefit entitlements from the Fund as collateral for a home mortgage. This enables members to construct, purchase, improve, alter or repair a residential house. The Fund can only issue one collateral at a time per eligible member. The process of furnishing the collateral is detailed in the Fund’s operational manual.

Proportion of assignable benefits

The portion of the benefits available as collateral must not exceed 50 per cent of the member’s benefit entitlement at the time of the application or the purchase price of the property, whichever is lower. In transactions where the purchase price is agreed upon but not finalised, the property's value should not exceed the declared purchase price for stamp duty purposes. For mortgages related to improvements, alterations, or repairs, the fair market value of the property should not exceed the cost of these activities as per regulation 4 of the Benefit Entitlements Regulations.

Conditions for collateral to members and institutions

To access the collateral, a member must be a Tanzanian citizen and an eligible member, with the collateral’s validity not exceeding the member’s compulsory retirement age. For institutions requesting collateral for member loans must obtain approval from the Division, have adequate operational and internal control systems for structuring and managing loans, maintain detailed records of transactions related to member loans, and generate required reports.

Application for approval 

Regulation 7 of the Benefit Entitlements Regulations provides that institutions intending to provide loans must apply in writing for approval from the Division. The application must include relevant documents such as company registration documents, documents detailing operational activities, valid business licence, financial statements, and qualifications of the board and management. The Division is required to review the application within 30 days and issue written approval or refusal, outlining reasons as applicable.

Validity of the collateral 

A collateral remains valid until membership cessation, full repayment of the mortgage, or any contravention of the Benefit Entitlements Regulations. The Fund may enforce a collateral upon a member’s default and the payments will be deductible from the member's benefits. In disputes between the member and the institution, the Fund will act as a mediator. However, in disputes between the Fund and the institution regarding arrangements, the Division will serve as the mediator.

Transfer to another Fund

According to regulation 15 of the Benefit Entitlements Regulations, the transfer of a member from one Fund to another does not invalidate the collateral issued under the Benefit Entitlements Regulations. Additionally, any member who has contributed to more than one Fund shall have the right to totalisation in accordance with the totalisation period of contribution guidelines issued by the Division.

Conclusion

The Benefit Entitlements Regulations represent a crucial step toward enhancing housing affordability and accessibility for members of social security schemes. By allowing eligible members to use their benefit entitlements as collateral for home mortgages, the Benefit Entitlements Regulations empower individuals to achieve homeownership more feasibly. The conditions and processes involved strike a balance between facilitating access to housing financing and safeguarding the interests of scheme members.

Overall, these Benefits Entitlement Regulations signal a positive shift in addressing housing challenges in Tanzania, potentially opening doors for more Tanzanians to realise their aspirations of owning a home.

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