BoT: Beware of unlicensed lenders

DAR ES SALAAM: THE Bank of Tanzania (BoT) has stressed the need for the public to avoid borrowing from or engaging with unlicensed institutions, companies, or individuals, citing the risk of high interest rates and unregulated charges.

According to the BoT statement, this move is crucial as engaging with unlicensed institutions or individuals exposes borrowers to financial exploitation, including high interest rates and hidden fees that lack regulatory oversight.

“It is crucial for anyone intending to borrow to use institutions licensed by the BoT to ensure the services they receive are safe and compliant with national laws,” BoT stated.

As of July last year, the BoT has registered more than 1,957 tier II microfinance providers to formalise operations, expand financial inclusion and better serve underserved communities.

“If an institution or individual wishes to engage in the lending business, they are required to follow the necessary procedures to apply for a license from the Bank of Tanzania in accordance with the law,” the BoT statement said.

ALSO READ: Strong growth fuels banking sector expansion

The Bank also noted reports on social media about lending practices involving animal symbols, such as tortoises and snakes, emphasising that such activities violate the law and ethical standards of financial services.

According to the statement, BoT urges the public to disregard such claims and refrain from engaging in these unlicensed and unlawful activities.

The Bank’s statement highlighted that under Section 16(2) (a) of the Act outlines penalties for operating lending businesses without a license, including a fine of no less than 20m/- imprisonment for a term of no less than two years or both.

Last year, the Bank reported receiving 15 to 18 weekly applications from microfinance service providers seeking to register their businesses.

To meet the growing demand for microfinance business formalisation, BoT announced plans to digitise the registration process, aiming to streamline and accelerate the procedure.

Before granting licenses to new microfinance service providers, BoT conducts inspections to ensure they comply with all required legal procedures.