Dar es Salaam, Tanzania —
In a decisive move aimed at protecting low-income borrowers and fostering a more inclusive financial sector, the Bank of Tanzania (BoT) has unveiled a robust strategy to rein in harmful lending practices among the country’s microfinance institutions.
Speaking today in Dar es Salaam, BoT Governor Emanuel Tutuba announced that all second-tier microfinance institutions—numbering over 2,600—are now required to register with either the Microfinance Union (TAMIU) or the Tanzania Association of Microfinance Institutions (TAMFI) within the next six months. Institutions failing to comply by December this year will have their licenses revoked.
“This initiative is part of our collective effort to create a friendlier policy, legal, and institutional environment for microfinance,” Governor Tutuba emphasized during the launch of a new self-regulation framework for the sector. “It is also a direct response to the public outcry over so-called ‘killer loans’—predatory credit products that have crippled borrowers financially.”
Cracking Down on “Loans That Drain Blood”
Microfinance has expanded significantly across Tanzania over the past decade, providing essential services to previously unbanked communities. However, the sector’s rapid growth has also been marred by aggressive lending, earning nicknames like mikopo umiza (“painful loans”), mikopo ya kausha damu (“blood-draining loans”), and mikopo ya kaba roho (“choking loans”).
The new framework, signed between BoT and the two industry associations in March this year, is designed to improve standards, safeguard consumers, and professionalize lending practices. Under the arrangement, the associations will coordinate oversight to ensure members comply with licensing conditions and adhere to ethical lending standards.
Tutuba said BoT had already taken disciplinary action last year, deregistering 58 institutions that flouted regulations. The Governor warned that any unlicensed lenders operating illegally must cease immediately, noting that providing loans without a BoT license is a criminal offense.
Driving Toward an 85% Formal Financial Access Target
While the proliferation of microfinance has been essential to expanding credit access, the Governor acknowledged that formal financial inclusion still lags behind targets. A 2023 study found that 76% of Tanzanians accessed formal financial services—a figure BoT aims to increase to 85% by 2028.
“With the investments the government has made in digital systems and the strong collaboration with telecom companies, I am confident we will surpass this target,” Tutuba said.
He urged citizens to embrace digital financial services to grow their businesses and improve their lives, while also challenging microfinance providers to invest in more financial education to empower consumers.
Sector Leaders Back the Reforms
The Director of the BoT’s Financial Sector, Sadat Musa, described the reforms as a “powerful catalyst for economic growth and financial inclusion.”
“These two associations have demonstrated the capacity to uphold standards and values. This self-regulation framework is an effective way to build a sustainable microfinance sector,” Musa explained.
Devotha Minzi, Chairperson of the TAMFI Board, pledged the associations’ commitment to implement the agreements and elevate service quality.
Looking Ahead
The BoT’s measures arrive at a pivotal time as microfinance increasingly intersects with Tanzania’s digital economy. As financial technology spreads, the country faces a critical balancing act: encouraging innovation and credit access without compromising consumer protection.
With determined enforcement, proactive collaboration among stakeholders, and rising public awareness, Tanzania is positioning itself to transform microfinance from a sector tarnished by predatory practices into a cornerstone of equitable growth.