The Bank of Tanzania is looking to put a lid on the liberties enjoyed by non-deposit digital platforms, specifically those that fall under Tier 2. This is a result of the conduct of some of these platforms which have led to distressing consequences of little regulations. Tanzania is hardly the first African country to go this route.
The Bank of Tanzania has decided to regulate loans issued by non-deposit-taking digital microfinance firms, as reported by The Citizen.
To this effect, the apex bank released a Guidance Note that would regulate digital lenders classified as Tier 2 Microfinance Service Providers.
The move is in response to growing unease of loans from these platforms, which for the past 2 years has been marred by shoddy management and poorly organized operations.
Some of the concerns include; excessive fees and interest rates, abusive debt recovery practices, inadequate identification of service providers, data privacy issues, and harassment through messages and other communication methods demanding payment.
The document released by the bank back in August notes that several issues have arisen as a result of the difficulties with digital microfinance services, such as worries about consumer protection, unstable markets, financial susceptibility, and harm to the microfinance subsector’s reputation.
As a result, the communique released by the bank on Wednesday mandates the Tier 2 firms to adhere to the earlier warnings
The statement reads; “Following issuance of the Guidance Note, the Bank of Tanzania directs all Tier 2 Microfinance Service Providers carrying out or intending to carry out digital lending business to ensure compliance with the requirements outlined in the Guidance Note.”
The BoT also made it clear that following this instruction is mandatory, warning that noncompliance would result in administrative penalties, suspension of digital lending, and termination of a tier 2 microfinance company license.
Back in May, the bank alluded to a similar issue, disallowing unlicensed online lenders to operate and instructing clients to only utilize loan services from businesses that hold active licenses in the nation of East Africa.
Tanzania is taking action against unlicensed digital lenders, joining markets such as Kenya and Nigeria in prohibiting unauthorized digital lenders.
August 2022 saw the implementation of new regulations by Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC), which mandated that digital lenders register.
