BoT calls for diligence in loan deals with microfinance firms
DAR ES SALAAM: THE Governor of the Bank of Tanzania (BoT), Emmanuel Tutuba, has urged Tanzanians seeking loans to carefully read and understand the terms and conditions before accepting any credit facility, while also ensuring they have clear and specific plans for how the borrowed funds will be used.
Speaking in a special interview with the Tanzanian Broadcasting Corporation, during discussions marking the Bank of Tanzania’s 60th anniversary and the value of the Tanzanian currency, Tutuba said understanding loan agreements would help borrowers avoid challenges arising from failure to comply with loan conditions.
He said the central bank has made significant progress in regulating licensed lending institutions that violate financial regulations, including those accused of exploiting borrowers through what is commonly referred to as predatory lending.
According to Tutuba, the Bank of Tanzania has so far licensed 1,229 Tier Two microfinance institutions to provide lending services. He noted that the majority of these institutions operate in compliance with the country’s laws and regulatory framework, while those found violating the rules face regulatory action, including suspension of their operations.
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Tutuba further revealed that the central bank receives numerous complaints from borrowers against lenders. However, assessments conducted by the BoT indicate that more than 90 percent of these complaints stem from borrowers themselves failing to comply with the terms of their loan agreements, with many taking out loans without clear financial plans or defined purposes.
“When you take out a loan, it is important to understand its terms and conditions and have a clear plan for how you will use the money,” Tutuba said.
He emphasized that a proper understanding of loan conditions, coupled with productive use of borrowed funds, is essential for strengthening financial discipline among borrowers and reducing disputes between customers and lending institutions.
