The Bank of Tanzania (BoT) has facilitated access to TZS2.1 trillion in loans for businesses and entrepreneurs through credit guarantees worth TZS1.6 trillion, helping address one of the major barriers to financing – lack of adequate collateral.
The guarantees, provided through two Government-backed schemes, are intended to support businesses with viable projects that struggle to secure loans because they cannot meet collateral requirements set by banks and other financial institutions.
BoT Senior Financial Analyst Gloria Chellunga revealed this on November 5, 2026, during a three-day seminar for journalists in Dar es Salaam, where she explained the operations and legal framework governing the credit guarantee schemes.
She said the Government had established two schemes, managed by the central bank, to improve access to credit for businesses and entrepreneurs with insufficient collateral.
They include the Export Credit Guarantee Scheme (ECGS), established in July 2002, and the Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), introduced in September 2005.
Under the arrangement, banks and other financial institutions apply to BoT for guarantees on behalf of prospective borrowers who qualify for loans but lack sufficient collateral.
Ms Chellunga said the lending institution must submit a formal application detailing the borrower's information, the amount sought and the collateral shortfall, while specifying the portion of the loan requiring a guarantee.
The central bank then assesses the proposed project to establish whether it is financially viable and capable of generating sufficient income to repay the loan.
The assessment also examines whether the project meets the schemes' eligibility requirements and whether the lending institution has followed the required credit assessment procedures.
"After satisfying itself that the project is viable and all requirements have been met, the Bank of Tanzania approves the guarantee, allowing the respective bank to proceed with lending to its customer," she said.
Once approval is granted, the lending institution signs an agreement with BoT outlining the guarantee conditions. However, the bank retains responsibility for managing the loan and ensuring repayment.
Ms Chellunga cautioned that the guarantees should not be interpreted as an exemption from normal lending requirements, saying both financial institutions and borrowers must continue observing repayment obligations.
Participating banks are also required to pay a guarantee fee equivalent to one per cent of the amount covered.
She said the schemes operate on a risk-sharing principle involving the borrower, the lending institution and the central bank, which administers the guarantees on behalf of the Government.
SMEs still face access barriers
Despite the financing facilitated through the schemes, Ms Chellunga said small and medium-sized enterprises (SMEs) continued to face challenges accessing the facilities, even though they were among the main intended beneficiaries.
She attributed the limited participation partly to the large number of businesses operating without formal registration, which prevents them from meeting the legal and administrative requirements for accessing financial services.
Business formalisation, she said, was therefore essential to expanding access to credit and enabling entrepreneurs to benefit from financial products offered by regulated institutions.
The challenge is particularly significant for women and young entrepreneurs, many of whom lack property and other assets that banks accept as collateral.
Ms Chellunga said some borrowers still struggled to obtain financing even when a guarantee scheme covered 50 per cent of the loan, because they could not meet the collateral requirements for the remaining portion.
This means that the existence of credit guarantee schemes does not automatically translate into access to finance for businesses that lack substantial assets.
She called for continued improvements to financial support mechanisms to ensure that more small businesses, particularly those owned by women and young people, could access credit and expand their economic activities.
The schemes are intended to bridge the gap between viable business opportunities and the financing needed to turn them into sustainable enterprises.