A crackdown on unlicensed digital lenders in Tanzania: a shift towards financial regulation

The Central Bank of Tanzania has taken a decisive step towards financial regulation, announcing that unlicensed digital lenders will no longer be allowed to operate in the country. Customers are asked to check valid licenses before contacting lending companies to ensure compliance with the new directive.

The move by the Bank of Tanzania (BoT) comes in response to concerns about questionable lending practices, including debt shaming and exorbitant interest rates. The decision is expected to impact more than 100 unregistered digital applications, which will be used by approximately 30% of adult mobile phone users who do not have access to traditional financial institutions.

Under the Microfinance Act 2018, lending without a valid license is considered illegal. The ban covers digital platforms offering instant loans, prompting calls for greater transparency and consumer protection measures. Licensed lenders will now be required to provide borrowers with detailed loan agreements setting out terms, total fees, interest rates and late payment penalties.

The public is advised to read loan agreements carefully, understand their terms and conditions and ensure that lenders have valid licenses issued by the Bank of Tanzania. The move links Tanzania with neighboring Kenya, where a crackdown on unlicensed digital credit providers has led to a reduction in the number of authorized mobile lending apps.

The move towards tighter financial supervision not only protects consumers, but also paves the way for a more transparent and accountable credit landscape in Tanzania. As African countries navigate the digital financial frontier, these types of regulatory interventions play a key role in supporting a sustainable and inclusive financial ecosystem.