BoT Rolls Out Tough Regulations to Curb Exploitative Lending

BoT Introduces Stricter Regulations to Curb Loan Sharks and Protect Borrowers

February 27, 2025

In response to growing concerns raised by members of parliament over exploitative lending practices, the Bank of Tanzania (BoT) has unveiled new regulations aimed at curbing the invasive tactics of loan providers. Among the most notable measures is a ban on lenders accessing borrowers' phone numbers, ensuring borrowers' privacy and protecting them from harassment.

The new regulations also mandate that digital lenders transparently disclose all terms and conditions to clients before they take out a loan. These conditions, previously presented as vague "terms and conditions," will now be clearly communicated to ensure borrowers are fully informed.

This move follows a directive from the Tanzanian Parliament, which urged the government to take action against lenders who harass borrowers by sending demeaning messages to their contacts, including family members and friends.

New Guidelines for Digital and Street Lenders

Speaking on behalf of the BoT, Senior Officer Deogratias Mnyamani stated that the new policy targets both online lenders and street-based lending institutions, who have earned notoriety for their aggressive tactics, often referred to as "blood-sucking loans."

Mnyamani confirmed that BoT had previously shut down 80 lending apps, with only 10 remaining compliant with the new regulatory standards. These reforms are designed to protect vulnerable borrowers from unscrupulous lending practices, which have gained prominence in recent years.

Parliamentary Response to Harassment and Exorbitant Interest Rates

The issue of harmful lending practices was first brought to light in Parliament, where Shally Raymond, a Special Seats MP, condemned the practice of lenders sending harmful messages to borrowers' contacts, causing distress and humiliation. She linked the practice to collaboration between lending institutions and mobile phone companies.

The Speaker of the National Assembly, Dr. Tulia Ackson, echoed these concerns, urging the government to investigate the high-interest rates and the troubling contracts between mobile companies and lending institutions.

Enhanced Oversight and Borrower Education

In line with these developments, Mnyamani highlighted that BoT's latest guidelines aim to balance the rights of both borrowers and lenders. One significant measure includes preventing lenders from accessing the phone numbers stored on borrowers' devices, including blocking them from adding borrowers to WhatsApp groups.

Additionally, the BoT is working closely with the Tanzania Communications Regulatory Authority (TCRA) to monitor and regulate online lenders. Mnyamani explained that the BoT provides the TCRA with reports on non-compliant lenders, who are then subject to penalties, including being banned from operating.

Addressing Informal Lenders

For informal street-based lenders, the BoT is focusing on educating both lenders and borrowers. Many of these lenders operate outside the formal financial sector and lack the legal knowledge necessary to protect borrowers. Mnyamani emphasized that if problems persist with these lenders, the BoT could issue warnings, impose fines, suspend services, or revoke licenses altogether.

He also cautioned borrowers to thoroughly understand the repayment terms before taking out loans, as many contracts were found to be exploitative during recent inspections. While lenders may face penalties for offering unfair terms, borrowers should also aim to repay loans on time to avoid falling victim to predatory practices.

BoT’s Ongoing Monitoring

As of February 21, 2025, the BoT had received 3,075 applications for lending licenses, with 2,450 lenders successfully licensed. On average, 18 to 20 new applications are submitted weekly.

Mnyamani also issued a warning regarding "get-rich-quick" schemes, labeling them as fraudulent. He urged the public to remain vigilant, pointing out that no legitimate institution offers savings plans with high-interest returns.