New guidelines on fees and charges from the Bank of Tanzania

On 16 July 2024, the Bank of Tanzania (BoT) published three new guidelines on fees and charges for banks and financial institutions (BFIs), microfinance service providers (MSPs), and non-bank payment system providers (PSPs) in an effort to ensure integrity and stability in the financial system.

These guidelines are:

1. the Guidelines on Fees and Charges for Banks and Financial Institutions, 2024 (the BFI Fees and Charges Guidelines);    
2. the Guidelines on Fees and Charges for Microfinance Service Providers, 2024 (the MSP Fees and Charges Guidelines); and
3. the Guidelines on Fees and Charges for Non-Bank Payment Systems, 2024 (the PSP Fees and Charges Guidelines). 

together, the Fees and Charges Guidelines. 

The Fees and Charges Guidelines are made pursuant to section 25 (1) of the Bank of Tanzania (Financial Consumer Protection) Regulations, 2019, which aims to ensure that the fees and charges which are imposed on financial consumers are fair, transparent, and approved by the BoT as the main regulator of the financial sector. It is our view that the Fees and Charges Guidelines will ensure that financial services are fairly competitive and favourable to consumers. 

In this legal update, we provide a summary of the Fees and Charges Guidelines. 

The BFI Fees and Charges Guidelines 

The BFI Fees and Charges Guidelines are applicable to all BFIs in relation to their fees and charges on financial products and services to ensure fairness, deter unfair charges, and enhance access to formal financial services and products.

Fees and charges

The BFI Fees and Charges Guidelines, provide that BFIs must impose fees and charges which are reasonable and affordable. In determining reasonability and affordability of fees, the BFIs should consider factors such as, service and benefit offered or provided; customer segment; public good and marginalised groups; cost options for services and products; and customer needs and preferences. 

Lending fees

The BFIs must disclose to their consumers all lending fees which are charged by the BFIs including loan management fees, commitment fees, facility enhancement fees, and loan restructuring fees. In addition, the BFI Fees and Charges Guidelines require that for a new loan application, management fees or charges should include processing fees, appraisal fees, credit reference report fees and search fees. Furthermore, BFIs are permitted to impose fees for payments made to third parties on behalf of their consumers to fulfil regulatory requirements i.e., valuation of collateral, security registration, insurance cover, government taxes and levies, and any other fees approved by the BoT. However, these fees should not exceed the actual payments made to the third parties. 

Insurance fees

The BFI Fees and Charges Guidelines direct that BFIs should not charge consumers insurance fees which exceed the actual premium charged by the insurer. Additionally, BFIs are restricted from charging insurance fees for a loan which is uninsured by a licensed insurance company.

Early settlement or cancellation fees

The BFI Fees and Charges Guidelines provide that early settlement or cancellation fees can only be charged if it is clearly stipulated in the loan agreement. On the other hand,  the BFI Fees and Charges Guidelines provide that penalties for late repayment may only be charged if such penalties are stipulated in the loan agreement otherwise the BFIs will not have the mandate to impose such fees on their consumers. Furthermore, even when a late penalty fee is provided for in the loan agreement, BFIs are restricted from imposing such late penalty fees where late repayment has been occasioned by the BFI in question. 

Prohibited fees

The BFI Fees and Charges Guidelines, provide for prohibited fees which BFIs should not charge or impose on their consumers. The prohibited fees include, but are not limited to, requests for one-month bank statements, review of 30 days past transactions through mobile app or internet banking channels, internal banking activities which do not involve the transfer of value, and card cancellation fees.

Furthermore, BFI Fees and Charges Guidelines restrict BFIs from imposing certain fees and charges to their consumers regarding services which are part and parcel of their internal operating processes or  risk management practices provided that such services are not prompted by the consumer or a systematic change. 

On demand services fees and charges

BFIs are mandated to impose fees or charges for on demand services (these are services which are not regularly offered by BFIs such as audit confirmation, photocopying of loan documents, issuance of redemption statements and retrieval of documents) provided that the fees charged do not exceed the actual costs incurred.  It is also prohibited for fees and charges for on demand services to be bundled under vague heading such as administrative fees or miscellaneous costs. 

Internal policy

The BFI Fees and Charges Guidelines require BFIs to establish an internal policy on fees and charges. The internal policy should include charges which reflect direct costs, rationales, value add to consumers, encouraging alternative methods, disclosure of key service information, basic financial inclusion services, and promotion of formal banking services among other things. 

The internal policy should also outline the roles and responsibilities of the board of directors (the Board), senior management, frontline staff, risk management, compliance, and internal audit functions. This will improve governance and accountability in fee structuring, promoting transparency and alternative banking methods. The requirement for regular reporting to the Board, highlights the importance of oversight in fee management.

Penalties

Failure to comply with the BFI Fees and Charges Guidelines will result in penalty not exceeding Tanzanian Shillings (TZS) 20 Million (equivalent to USD 7,393.72) imposed by the BoT. The penalty may apply to directors, officers or employees of the BFIs.

The MSP Fees and Charges Guidelines

The MSP Fees and Charges Guidelines apply to non-deposit taking MSPs or commonly known as Tier 2 who are operating in Tanzania Mainland. The MSP Fees and Charges Guidelines aim to guide MSPs on fees and charges of their financial products and services, with the intent to ensure fairness, deter unfair charges, promote fair competition, spur innovation, and enhance access to formal financial products and services for Tier 2 operators. 

Fees and charges

MSPs are required to impose reasonable and affordable fees and charges. In determining reasonability and affordability of fees and charges, MSPs should consider factors such as service and benefit offered; customer segment; public good and marginalized groups; cost options for the services and products; and customer needs. 

Lending fees

The MSP Fees and Charges Guidelines mandate MSPs to disclose all the lending fees which are charged to their consumers including management fees and loan restructuring fees in the loan agreement.  In addition, the MSP Fees and Charges Guidelines clearly provide that the management fees imposed on lending should be a one-off fee and it may include application and processing fees but not direct third-party fees. Restructuring fees to the existing loan facilities on the outstanding amount may be imposed to consumers as a one-off fee at a reasonable and affordable rate. 

The MSP Fees and Charges Guidelines provide that MSPs may impose fees for payments made to third parties on behalf of their consumers to fulfil regulatory requirements such as agent commission, credit reference report, search fees, title registration, discharge, tracking device and any other fees and charges approved by the BoT. However, such fees should not exceed the actual payments made to third parties. 

Furthermore, the MSP Fees and Charges Guidelines direct that MSPs may charge a penalty for late repayment only if it is stipulated in the loan agreement otherwise such fees shall not apply to consumers. Further MSPs are restricted from charging late repayment penalties if such late repayment  is caused by the MSPs’ negligence. Other credit-related services fees should not exceed the actual costs incurred in offering those services.

Insurance fees

MPS are restricted from charging insurance premiums that are above the actual premium charged by the insurer. Also, MSPs should only charge insurance fees if the loan is not insured by a licensed insurance company.

Early settlement and cancellation fees

MSPs may charge  their consumers early settlement or cancellation fees if the relevant fees are clearly stipulated in their loan agreements.

Prohibited fees

The MSP Fees and Charges Guidelines restrict MSPs from imposing fees and charges on financial consumers for activities that are part of their operating processes or risk management practices. Some of the prohibited fees include, but are not limited to, administrative fees, maintenance fees, customer inquiries fees, issuance of loan statements fees, chattel storage and management costs, loan enhancement fees, office expenses, and passbook. 

Internal policy and internal controls

The MSP Fees and Charges Guidelines require MSPs to establish adequate and appropriate internal controls on imposition of fees and charges on financial products and services. In addition, MSP Fees and Charges Guidelines mandate MSPs to have an internal policy on fees and charges. The internal policy should include the roles and responsibilities of those in charge of governance and senior management of the MSP in relation to management of fees and the basis for imposition of fees and charges on financial products and services, among others.

Penalties

Failure to comply with the MSP Fees and Charges Guidelines, will result in a penalty not exceeding TZS 20 Million (equivalent to USD 7,393.72) imposed by the BoT. The penalty may apply to directors, officers or employees of the MSPs.

The PSP Fees and Charges Guidelines 

The PSP Fees and Charges Guidelines apply to all non-bank payment systems providers i.e., Mpesa, Airtel Money and Tigo Pesa with the aim to ensure fair fees and charges for non-bank payment systems, deter unfair charges, promote fair competition, spur innovation, and enhance access to formal financial services and products. This is achieved through a clear governance structure for managing fees and charges on financial products and services as established by the respective PSPs. The Board and senior management must approve and review strategies, policies, and procedures which ensure fairness and equity for their consumers.

Internal policies for fees and charges

Just like the BFIs and MSPs, PSPs must also establish an internal policy for imposing fees and charges. The internal policy should at a minimum outline the roles and responsibilities of the Board, Senior Management, staff, risk management, and compliance function. The policy should also include charges reflecting direct costs, rationales, value add to consumers, alternative methods, disclosure of key service information, basic financial inclusion services, and formal payment systems.

Fees and charges  

The PSP Fees and Charges Guidelines require PSPs to impose reasonable and affordable fees and charges to their consumers by considering factors such as service, customer segment, public good, marginalised groups, and cost options for services and products.

PSPs may impose fees and charges on electronic money transactions, including wallet-to-wallet, merchant payments, withdrawals, and other electronic transactions. 

Negotiable fees and charges

PSPs may impose negotiable fees and charges on services that are initiated by consumers on a negotiable basis. These fees may be a special request for statement of account, bulk payment to account holders, and bulk payment to non-account holders.

Prohibited fees

The PSP Fees and Charges Guidelines restrict PSPs from imposing fees and charges on services that are part and parcel of their internal operation activities in providing services to consumers. In addition, PSPs shall not impose fees and charges on the following services: call centre services, digital statement issuance, maintenance, cash-in, e-wallet account opening/renewal, airtime purchases, PIN reissue, and account balance inquiries. 

BoT approval on  new fees and fee revision

PSPs must seek written approval from the BoT when revising upward existing fees or when imposing new fees and charges. When seeking approval for the forementioned, PSPs must provide to the BoT relevant information on type of fees and charges, existing fees and charges, proposed fees and charges, and justification for the proposed fees. Furthermore, PSPs must notify the BoT of any downward change of fees and charges which are offered in line with marketing campaigns provided that this is done for a specific period i.e. special discount.  

Penalties

Failure to comply with the PSP Fees and Charges Guidelines will result in a penalty not exceeding TZS 20 Million (equivalent to USD 7,393.72) imposed by the BoT. The penalty may apply to directors, officers, or employees of the PSPs.

Aside from the monetary penalties, PSPs may face administrative sanctions from the BoT such as suspension from operating for a period of one year, suspension of management staff, and suspension or withdrawal of financial products or services or advertisement material, just to mention a few. 

Conclusion 

It is commendable for the BoT to issue the Fees and Charges Guidelines in an effort to stir the financial sector towards fairness, accessibility of the financial products and services to all consumers. The Fees and Charges Guidelines mandate the BoT to issue circulars and directives on fees and charges relating to specific financial services and products. This will ensure high levels of compliance for the BFIs, MSPs, and PSPs irrespective of their operation size, quality services, and fair pricing of their financial products and services creating a more stable and dependable financial ecosystem.

If you have any questions, please contact Tenda Msinjili.