Fintech sandbox to strengthen Tanzania’s startup ecosystem

Dar es SalaamThe recent launch of the Fintech Regulatory Sandbox by the Bank of Tanzania (BoT) has been met with enthusiasm by stakeholders in the startup sector in Tanzania, promising to revolutionise innovation and market access in the fintech industry.

The sandbox is expected to facilitate cross-sectoral learning and help develop solutions to address the diverse challenges facing the country.

According to the Tanzania Startup Ecosystem Status 2023 report, fintech startups currently account for 8.83 percent of the 842 known startups in Tanzania, contributing significantly to the creation of 9,888 jobs.

In an interview with The Citizen, CEO of Tanzania Startup Association, Mr. Zahoro Muhaji said the launch of Fintech Regulatory Sandbox will help remove long-standing barriers that stifle innovation.

“It offers a flexible environment where startups can test their products, with less regulatory burden, which fosters innovation and improves market access.

This initiative marks an important milestone in our drive to drive socio-economic development through technology.

“Such sector-specific regulatory sandboxes will streamline the regulatory process for innovators, strengthen cross-sector learning and support the development of solutions that address the diverse challenges Tanzania faces,” he said.

Mr. Muhaji added that with the implementation of the sandbox, fintech startups can now test their products in a controlled and regulated scope, increasing their potential to significantly contribute to the development of Tanzania.

He also called on other sector regulators across industries, including healthcare, agriculture, energy, insurance and transport, to build on this momentum to establish sector-specific regulatory sandboxes based on the National Regulatory Sandbox Framework.

Catherinerose Barretto, co-founder of Binary Labs, highlighted that the sandbox can play a critical role in the fintech ecosystem in Tanzania by offering software developers access to application programming interface (API) endpoints for locally developed fintech applications.

“Software developers will benefit from using it to test applications from prototypes to final deployments,” she added.

She also noted the potential for increased innovation, investment and economic growth in the startup ecosystem.

“Successful innovations in the sandbox can be more easily scaled, with the potential to extend them beyond Tanzania to other markets in the region,” she added.

Mipango App Co-Founder and CEO, Ms. Lilian Makoi, appreciated the framework that reduces regulatory barriers and enables innovation and testing in a controlled environment.

“This framework encourages innovation and guarantees the A consumer, which is key to building trust with our users,” she added.

Ms Makoi believes the initiative will encourage more startups to enter the market, increase competition and lead to innovative financial solutions tailored to the needs of the Tanzanian people.

Serial entrepreneur, Mr. Michael Nyamwero, emphasized that despite the passage of time, the sandbox is a step in the right direction.

“The introduction of this sandbox will make the process of moving forward much easier,” he said, noting that it offers a great opportunity for regulators and innovators to work together to ensure product safety and community impact.

Similar views are shared by Tembo Plus founder, Mr. Victor Joseph, who said that the sandbox provides young innovators with the opportunity to test their ideas in a supportive environment.

Obtaining a license is often associated with high costs and the need to invest significant capital.

“This is a prime opportunity for recent fintech graduates who don’t have enough capital,” he said.

Meanwhile, when contacted for comment, BoT Director of Financial Deepening and Inclusion, Kennedy Komba, told The Citizen that the Bank of Tanzania (BoT) has issued the Fintech Regulatory Sandbox Regulation 2024, which aims to create an enabling environment for innovative financial services and products offered by financial institutions regulated by the BoT.

The regulation was published on 5 July 2024 and announced in the Official Journal in Government Notice No. 540 of 2024.

He added that the purpose of the regulation is to promote Fintech innovations to be tested and implemented in a production environment, within the regulatory scope of the BoT, using specific parameters and time frames for placing them in the regulatory sandbox.

“The overarching goal is to create a conducive regulatory environment for the implementation of financial technologies that have the potential to introduce specific financial services solutions relevant to a given country’s context,” he said.

He stressed that it is designed specifically for financial services technologies that fall within the scope of BoT regulations.

With that in mind, he said Sandbox is expected to launch before the end of the year.

According to him, once the Sandbox launches, it will start accepting applications from Fintech entities to test minimum viable projects.

The application process will take place via a portal on the BoT website.