An overview of Tanzania’s Microfinance Regulations: Key Changes for Non-Deposit Taking Microfinance Service Providers

Microfinance in Tanzania is a dynamic sector that continues to evolve; it plays a crucial role in broadening financial access to individuals and businesses that lack traditional banking services, not least women entrepreneurs. Non-deposit taking microfinance service providers have expanded their reach, offering tailored financial solutions and thereby empowering Tanzania’s underserved communities.

Recognising the need for stronger oversight and adaptability, the Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations of 2025 (the 2025 Regulations) have been drafted to replace the 2019 Regulations. The 2025 Regulations (which, as of the date of this updater, are still in draft form awaiting input from stakeholders), introduce a more structured and inclusive regulatory framework. They aim to enhance transparency, accountability, and financial stability within the sector, ensuring sustainable growth while fostering responsible lending practices.

Below, we highlight the key changes introduced in the 2025 Regulations.

Key terms

The following are terms used in this article:

• “Act” means the Microfinance Act No. 10 of 2018 (as amended);
• “Credit reference bureau” means an entity specialized in collection and sale of credit performance information for individuals and entities as defined under the Act;
• “Foreign owned microfinance service provider” means a microfinance service provider incorporated in Tanzania and whose majority owners or shareholders are foreigners as defined under the Act;
• “Microfinance business” means the deposit and non-deposit taking business, including the activities stipulated under Section 4 of the Act; 
• “Non-deposit taking microfinance service providers” means financial institutions that offer microfinance services, such as small loans, without accepting deposits from the public

Key provisions under the 2025 Regulations:

Application for licence 

Regulation 6 simplifies the licensing process by removing the requirement for foreign-owned microfinance service providers to submit a training plan and succession plan, as was required in the 2019 Regulations. 

Integrity assessment 

Regulation 7 broadens the integrity assessment for applicants who are applying for a non-deposit taking microfinance licence. Previously focused on shareholders or proprietors of the company, the 2025 Regulations now extend to partners and trustees in the evaluation process. The Bank of Tanzania (the BoT) will also consider reports from credit reference bureaus and other relevant sources to assess the integrity of the proposed shareholders. This aims to strengthen due diligence, ensuring greater transparency and accountability within the sector.

Financial capacity 

Regulation 8 simplifies the BoT’s evaluation of an applicant's financial capacity by focusing solely on the capital position as reflected in the applicant’s financial statement or bank statement. This is a shift from the previous approach, which considered broader factors like net worth, financial support, and the source of ownership financing. The 2025 Regulations narrows the criteria, making the evaluation more streamlined, ensuring that the financial assessment is clear and straightforward for both the applicant and the BoT.

Chief Executive Officer (CEO) and board changes 

The 2025 Regulations, under Regulation 11, require that non-deposit taking microfinance service providers obtain prior approval from the BoT before appointing a CEO or any members of the governing body. Additionally, they must submit a completed questionnaire, as specified in the fourth schedule to the 2025 Regulations, to the BoT for review. This process ensures that the BoT can assess the suitability of key personnel, strengthening oversight and accountability within the sector.

Determination of the application 

The 2025 Regulations under Regulation 12, have enhanced the process for determining licensing applications for non-deposit taking microfinance service providers. Applicants are now given a 60-day window to comply with all application requirements. If the requirements are not met within this period, the BoT will cancel the application. This change ensures a more efficient and timely licensing process, promoting clarity and accountability for applicants.

Transferability of the licence 

Regulation 13 introduces a significant change by explicitly prohibiting the transfer or assignment of a licence issued to a non-deposit taking microfinance service provider. This ensures that the licence stays with the original provider, promoting better regulatory control and accountability. 

Closure of microfinance business  

The 2025 Regulations provide a clear and structured process for both temporary and permanent closures of non-deposit taking microfinance businesses as follows:

Temporary closure

According to Regulation 15, non-deposit taking microfinance service providers that plan to temporarily close their operations for up to six months must: provide a 30-day notice to customers and employees; enable existing borrowers or creditors to continue servicing their debts; and maintain periodic reports to the BoT throughout closure. The BoT may revoke the licence if the business remains closed for more than 6 months without notification.

Permanent closure

For permanent closures, non-deposit taking microfinance service providers must, in addition to the notification requirements, discharge, deregister, and return all collateral pledged by borrowers once their outstanding obligations are fully settled, or transfer the collateral if the portfolio is transferred to another lender; settle all statutory obligations and pending liabilities; and establish formal agreements with creditors for obligations that will be settled after the business closure.

Post closure activities 

Regulation 18 outlines the post-closure activities for non-deposit taking microfinance service providers. After closing their operations, businesses must refrain from engaging in any microfinance activities. They are permitted to collect or transfer outstanding loans for a period of up to three months. Additionally, there is an obligation requiring customer data to be securely handled in accordance with the Personal Data Protection Act No. 11 of 2022 to ensure privacy and compliance.

Surrender of licence 

Regulation 17 mandates all non-deposit taking microfinance service providers that have ceased operations or have had their licences revoked, to surrender their licence to the BoT within fourteen days. This must be done after all debts are settled and collateral is returned to customers, ensuring that all financial obligations are properly addressed before the business can officially close.

Permissible activities 

Regulation 26 introduces changes to the activities that non-deposit taking microfinance service providers are permitted to conduct. Some activities that were previously permitted, such as maintaining various bank accounts, and equity investments, have now been excluded. However, the 2025 Regulations allow non-deposit taking microfinance service providers to act as agents for mobile money operators, which was not previously permitted.

Minimum capital requirements 

Regulation 48 introduces a distinction in minimum capital requirements based on ownership. Non-deposit taking microfinance service providers with majority foreign ownership must have a minimum capital of Tanzanian Shillings (TZS) 500 million, while those with majority local ownership still need at least TZS 20 million. Foreign-owned microfinance service providers in operation before the 2025 Regulations have a 12-month grace period to comply with these provisions.

Minimum liquid assets  

Regulation 49 requires non-deposit taking microfinance service providers to maintain minimum liquid assets of at least 1% of their total outstanding gross loans, down from the previous 5% of total assets. Liquid assets include legal tender, bank balances (excluding cash collateral), and unencumbered treasury bills and bonds. 

Management takeover 

Regulation 53 outlines the specific grounds under which the BoT can take over the management of a non-deposit-taking microfinance service provider, including poor financial health, failure to adhere to risk management policies, or operating contrary to the law. Under the 2025 Regulations, the BoT is mandated to manage such providers with diligence and in accordance with sound corporate governance principles. Within 60 days of taking possession, it must inventory the provider’s assets and liabilities, assess its capital structure, and determine whether restructuring, reorganization, or liquidation is necessary. Additionally, shareholders lose their rights to their shares unless the BoT decides otherwise.

Conclusion 

The 2025 Regulations offer a more structured and inclusive framework compared to the 2019 Regulations. As the microfinance sector continues to develop and grow, so too will the need for it to be appropriately regulated. However, if the opportunities are properly harnessed, microfinances could have a significant impact on Tanzania’s long-term economic development, serving as an example for the rest of the world. 

Please contact Tenda Msinjili should you have any questions.