BoT warns against informal savings schemes, cautions artists

DAR ES SALAAM: THE Bank of Tanzania (BoT) has urged members of the public to avoid informal “upatu” savings schemes and savings-and-lending groups that operate without proper procedures, stressing that such activities must be conducted in accordance with the law.

BoT has also urged people who wish to establish microfinance service groups to ensure that they register them in accordance with the Microfinance Services Act of 2018 in order to gain legal recognition and avoid penalties.

Assistant Manager in the Microfinance Supervision Department at the Bank of Tanzania, Mary Ngassa, made the remarks yesterday in Dar es Salaam during training for artists in the country on currency-note identification and various microfinance laws.

She said the microfinance sector has four categories of service providers: microfinance banks, SACCOS, microfinance service groups, and companies and individuals engaged in lending businesses.

For small microfinance service groups, she said, citizens should begin the process at their local government offices, where they will receive guidance on registration procedures.

“We need to do things according to the procedures provided by law. It is possible that some people are doing this without knowing the requirements, but we now know, and we ask you to help us pass on this information,” she said.

Ngassa said that, unlike informal upatu schemes, which can be dissolved at any time, registered groups continue to exist legally and enable members to conduct their financial activities in an orderly manner.

She said such groups should have a constitution, leaders and clearly understood procedures for their members, while the money collected should be used for activities specified in accordance with the law.

“When we belong to these associations or groups, remember that the money belongs to you. Therefore, you can set interest rates, fees and other loan-related charges that may be affordable,” Ngassa said.

She said registration also gives groups legal recognition and protects them against losses and penalties that may result from conducting financial activities unlawfully.

She added that some registered groups have been able to undertake other economic activities, including investing in government securities, while enabling members to obtain loans on affordable terms.

Artists cautioned

Speaking to artists, Ngassa urged them to use their influence to educate the public about the proper use of financial services rather than encouraging people to join informal financial services.

She said BoT had received complaints involving some prominent individuals who borrow from unlicensed institutions and later fail to repay their loans.

She said such situations could damage the reputation of a public figure and even affect their opportunities to access financial services from other institutions.

Ngassa urged artists to first establish whether the institution they intend to borrow from has a BoT licence.

“The most important thing is to make sure, before you borrow, that the service provider you want to borrow from has a licence from the Bank of Tanzania,” she said.

She said that after confirming the lender’s licence, borrowers should carefully read the loan agreement and understand the interest rate, fees, other charges, repayment conditions and any penalties that may apply.

Warning to unlicensed lenders

Ngassa said any individual or institution engaged in lending without a licence could face legal action.

She said that, for some categories of service providers, penalties could include financial fines and imprisonment, stressing that members of the public should avoid dealing with services provided by unlicensed individuals or institutions.

She said citizens can check the list of licensed institutions through the BoT website before taking out a loan.

“We are saying this because we have seen many people being exploited by institutions that do not have licences,” she said.

She added that some unlicensed institutions establish their own procedures outside the legal framework, a situation that can leave borrowers in difficult circumstances.

The remedy for debt is repayment

Ngassa urged members of the public not to rush into taking loans but to assess their ability to repay the money.

She said borrowers should consider their income and basic needs before deciding how much they can afford to borrow and repay.

“Once you borrow, the remedy for a loan is to repay it,” she said.

She said members of the public who encounter challenges with financial services can submit complaints through the BoT complaints desk or through the SEMA NA BoT system, which is available on the Bank of Tanzania website.

Ngassa also urged the artists who attended the BoT training to become ambassadors for financial literacy in society because of the significant influence they have through their platforms.

She said messages delivered by artists can reach many people both inside and outside the country, and therefore they should ensure that they provide accurate information about financial services and legal procedures.

Earlier, BoT Bank Examiner Joseph Lubava said that only 19 institutions have been authorised by the Bank of Tanzania to provide online lending services.

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“We are working together with the police to control those providing online loans without permits from the Bank of Tanzania,” Lubava said.

He said that, by June this year, BoT had already blocked 116 online applications that did not have a BoT licence to provide microfinance services.

“But we are continuing to take action, and in July and August this year the number of applications we have blocked online increased, reaching a total of 130 so far,” Lubava said.

The measures come amid incidents and complaints from members of the public who have been defrauded by people operating and running online upatu schemes without licences and in violation of the law.