The Bank of Tanzania (BoT) has launched a self-regulatory framework for Tier II microfinance institutions, a move expected to improve sector oversight, promote financial inclusion, and reinforce public confidence in microfinance services targeting low-income households and small-scale entrepreneurs.
The framework, which delegates supervisory roles to key industry associations, marks a shift from centralized to collaborative regulation and is considered a milestone in modernizing Tanzania’s microfinance landscape.
Under the arrangement, the Tanzania Association of Microfinance Institutions (TAMFI) and the Tanzania Microfinance Institutions Union (TAMIU) will now oversee the conduct of their members while the BoT retains its core licensing and policy oversight functions.
“This initiative is part of broader efforts to create a supportive environment for inclusive financial services,” said BoT Governor Emmanuel Tutuba at the launch event in Dar es Salaam.
He added that “It emphasizes ethical conduct, consumer protection, and transparency as cornerstones of a resilient microfinance sector.”
The self-regulatory model stems from a cooperation agreement signed in March 2025 between the BoT and the two associations.
It mandates TAMFI and TAMIU to monitor member compliance, manage grievance redress mechanisms, conduct financial literacy campaigns, and enforce adherence to national regulations.
All Tier II institutions must register with either TAMFI or TAMIU by December 2025 to align with the new framework. Non-compliance could result in loss of eligibility to operate, BoT officials warned.
The shift toward delegated regulation comes as microfinance institutions increasingly serve as a critical financial access point for Tanzania’s unbanked population.
According to BoT figures, the country has around 2,600 microfinance institutions, many of which serve clients excluded from formal banking services.
To enhance transparency and operational efficiency, a shared Management Information System (MIS) is under development.
Governor Tutuba pointed to a similar system being built by UBX Company and SCULLT for cooperative societies, calling it a potential model for broader adoption within the microfinance sector.
“The use of shared technology will reduce costs and enhance monitoring,” Tutuba said. “It will also support evidence-based policy decisions and improve service delivery.”
Also speaking at the event, Sadat Musa, the BoT’s Director of Financial Sector Supervision, emphasized the framework’s importance in stabilizing a fragmented sector that has historically suffered from inconsistent compliance and consumer mistrust.
“Microfinance institutions play a pivotal role in deepening financial inclusion,” Musa said. “The self-regulatory model empowers stakeholders while keeping BoT oversight intact to ensure national policy objectives remain on track.”
Musa, speaking on behalf of Deputy Governor Sauda Kassim Msemo, urged all Tier II providers to align with either TAMFI or TAMIU and embrace the new Code of Ethics for Microfinance Service Providers.
He underscored the need for improved financial education among clients to reduce over-indebtedness and strengthen financial resilience.
“As the sector matures, self-regulation will become critical for ensuring discipline, responsiveness, and long-term sustainability,” he added.
Industry leaders welcomed the framework as a timely intervention. Devotha Minzi, Chairwoman of TAMFI, expressed confidence in the collaborative approach, promising to work closely with BoT to restore credibility and improve services across the sector.
“We are happy to have reached this point,” Minzi said. “It is a major opportunity to strengthen trust in microfinance institutions and build a more client-centered industry.”
The framework aligns with national policy priorities under the Financial Sector Development Master Plan 2020–2030 and the National Financial Inclusion Strategy 2023–2028, which seek to expand access to financial services while ensuring regulatory soundness and consumer protection.
With the rollout now underway, stakeholders are hopeful the self-regulatory system will professionalize Tier II providers, standardize industry conduct, and help unlock microfinance’s full potential in driving inclusive economic growth.