Lenders have been strongly urged to refrain from using family assets as collateral for loans without obtaining explicit consent from the family, to prevent potential conflicts that may arise if these assets are lost due to failure to repay the loans.
Mr. Ramadhani Myonga, Senior Legal Officer at the Department of Financial Inclusion and Welfare Services, Bank of Tanzania (BoT), made this call during a financial literacy training session for residents of Kyankoma Village, Butiama District in Mara Region.
The event was organized by the Ministry of Finance, in collaboration with various government institutions including UTT AMIS Investment Company, NSSF, and financial institutions such as the Bank of Tanzania (BoT), TCB, NMB, CRDB, and NBC.
"Lenders must be cautious and fully understand the terms of loan agreements before using family assets as collateral. It is essential that these assets do not endanger the family’s financial stability," Mr. Myonga emphasized.
He also pointed out that financial institutions must follow proper legal procedures before accepting family assets as collateral. This includes ensuring that all necessary documents, such as ownership titles and written consent from the family, are provided.
Discussing the role of loan guarantors, Mr. Myonga advised the public that before agreeing to guarantee a loan, they should be certain that the borrower is capable of repaying the loan on time.
He explained that if a borrower defaults, the guarantor becomes liable for repaying the entire loan, which could severely impact their own assets and financial situation.
Ms. Rebeca Sanga, Community Development Officer for Butiama District, emphasized the importance of effective management of group projects to ensure they generate profits that benefit both the group and individual members.
She added that when group projects are well-managed, they can create a sustainable source of capital, enabling members to lend to each other and avoid taking out high-interest loans.
Mr. Bryan Mkurya, a participant in the financial literacy training, called on the government to continue providing financial education at all levels, from neighborhoods to wards, to ensure that every citizen receives financial literacy.
He also suggested that both borrowers and lenders be educated together to ensure mutual understanding, which would help minimize conflicts surrounding loans.
Mr. Mkurya further recommended that the government use various community gatherings, including religious institutions and other recognized events, to deliver financial education, reaching a larger audience more efficiently.