Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
Upatu is the most prevalent method of savings and credit, in 26 % of villages, and mostly by women. Upatu involves 10 – 20 members who know and trust each other, in a rotating savings and credit association.(See Randhawa and Gallardo 2003)
Definitions of microfinance or microcredit
Microcredit means a credit whose security may include non-traditional collateral, granted to a natural person, individually or in a group, whose income depends on her own business or economic activity and who may lack formal financial statements or other accounting and operational records. (See Microfinance Companies and Micro Credit Activities Regulations of 2004)
General Participation in the Financial Services Market
No. of institutions
No. of clients
Total Assets
Deposits
Target Market
Constraints to provision of microfinance services
Banks
Commercial Banks
23 (including 3 Regional Banks)
US $2,220,519,700 (Figures for banks were taken from the Bank of Tanzania, Consolidated Financial Statements for the Quarter Ending Sept. 30, 2003)
US $1,812,393,300
Unsecured loans to a single borrower may not exceed 5% of a licensed bank’s capital, with acceptable collateral limited to cash or near cash securities. This ceiling is likely to have an adverse impact on the wholesale lending by licensed banks, including regional banks, to microfinance NGOs or SACCOs.
Further, investment in fixed assets for commercial banks is limited to no more than 10% of capital, which could be a serious constraint on the ability of smaller banks - notably, regional banks — to be adequately equipped for efficient banking operations, e.g., office space, computers, vehicles, etc. (See Randhawa and Gallardo 2003)
Non-bank Financial Institutions
Microfinance Company
The poor in rural or urban areas
Non-bank Financial Institution
8
US $71,039,370 Figures for NBFIs were taken from the Bank of Tanzania, Consolidated Financial Statements for the Quarter Ending Sept. 30, 2003)
US $43,852,885
Unsecured loans to a single borrower may not exceed 5% of a licensed bank’s capital, with acceptable collateral limited to cash or near cash securities. This ceiling is likely to have an adverse impact on the wholesale lending by licensed banks, including regional banks, to microfinance NGOs or SACCOs.
Further, investment in fixed assets for commercial banks is limited to no more than 10% of capital, which could be a serious constraint on the ability of smaller banks - notably, regional banks — to be adequately equipped for efficient banking operations, e.g., office space, computers, vehicles, etc. (See Randhawa and Gallardo 2003)
A bank is a financial institution authorized to receive money on current account subject to withdrawal by check. (See section 3 of 1991 Act.)
Only three regional banks have so far been established and the indications are that these banks have been established principally to address the requirements for banking services of community-based microfinance institutions and organizations, the SACCOs and other non-financial primary cooperative societies. (See Randhawa and Gallardo 2003)
A financial institution licensed by the Bank of Tanzania as a microfinance institution under section 3 of the Act to undertake banking business mainly with individuals, groups and micro enterprises in the rural or urban area of Tanzania Mainland and Tanzania Zanzibar.
A non-bank financial institution is any person authorized by law or the Bank to engage in banking business not involving the receipt of money on current account subject to withdrawal by check. NBFIs can be either deposit-taking or non-deposit taking. (See section 3 of 1991 Act.)
Accepting and collecting of deposits from the public and using such funds to make loans, advances, or investments under certain conditions (e.g. unable to hold checking accounts for its clients.)
Regional financial institutions have lower minimum capital requirements and must operate within confined geographical areas.
These regulations shall apply to societies incorporated under the Cooperative Societies Act No. 4 of 1986.
Legal entity established by the voluntary membership of private or public persons for the purpose of depositing their savings and providing credits to its members (See Savings and Credit Cooperative Societies Regulations, 2004, art. 9)
No person or group may own more than 20% of the core capital of any bank or financial institution. (See section 36 of 1997 Regulations)
Application cost of US $1802. Bank of Tanzania will accept or reject an application within 90 days of receiving it. (See section 20 of 1997 Regulations)
No person or group may own more than 20% of the core capital of any bank or financial institution. (See section 36 of 1997 Regulations)
Application cost of US $1802. Bank of Tanzania will accept or reject an application within 90 days of receiving it. (See section 20 of 1997 Regulations)
Application must include details of feasibility studies, projected business plans and projected balance sheets, income statements, and cash flow statements. (See section 12(1) of 1997 Regulations)
Bank of Tanzania “shall investigate and scrutinize the financial capacity of applicants” before issuing a license. (See section 5 of 1997 Regulations.)
Non-bank Financial Institutions
Microfinance Company
Fit and proper test for all proposed shareholders whose participation exceeds 1% of the equity of the MFI, members of the board of directors and management. The board must have at least 5 directors and the CEO must have a satisfactory record in managing a financial institution. (See Microfinance Companies and Micro Credit Activities Regulations of 2004.)
Application must include details of feasibility studies, projected business plans and projected balance sheets, income statements, and cash flow statements. (See section 12(1) of 1997 Regulations.)
Bank of Tanzania “shall investigate and scrutinize the financial capacity of applicants” before issuing a license. (See section 5 of 1997 Regulations.)
Cooperatives/Credit Unions
Savings and Credit Cooperatives
Minimum 20 members with fully paid shares to qualify for registration.
Regional Banks: US $188,540 to US $47,135, depending on the size of the city where the head office is located. (See Schedule 4 of Capital Adequacy Regulations, 2001.)
Shareholders must double this core capital within 5 years of approval of the bank’s license. (See section 8 of Capital Adequacy Regulations, 2000.)
Capital adequacy ratio for core capital equal to 8% of risk-weighted assets plus off-balance-sheet risks.
Minimum total capital equivalent to not less than 10% of total risk-weighted assets plus off-balance-sheet risks. (See section 9 of 2003 Amendments.)
Risk-weighted assets determined by multiplying outstanding value of assets, minus allowances for losses/depreciation, by prescribed risk weight factors of such assets, which are set out in Schedule 2 of the Capital Adequacy Regulations, 2001. For example, accounts with banks in OECD countries are assigned a lower risk weight than those in non-OECD countries.
2% of general loan portfolio plus:
• 31-60 days overdue: 5% of loan amount
• 61-90 days overdue: 25%
• 91-180 days overdue: 50%
• Over 180 days: 100%
Required minimum liquid assets must be 20% of demand deposit liabilities. Maximum ratio of loans to deposits is 80% of total deposits. (See section 8 of
Liquid Assets Regulations, 2000.)
A minimum core capital of US $787,000 (Tsh 800,000,000) in the case of microfinance companies with nation-wide branches and a minimum capital of US $197,000 (Tsh 200,000,000) in the case of Microfinance Companies with only one branch office. (See Microfinance Companies and Micro Credit Activities Regulations of 2004.)
The minimum amount of specific provisions shall be:
• Current loans: 2%
• Up to 30 days overdue: 25%
• 31-60 days overdue: 50%
• 61-90 days overdue: 75%
• More than 90 days: 100%
US $471,350. See section 17 of Capital Adequacy Regulations, 2001. Regional unit financial institutions must have a minimum capital of US $94,270 to US $47,135, depending on the size of the city where the head office is located. (See Schedule 5 of Capital Adequacy Regulations, 2001.)
Shareholders must double this amount within 5 years of approval of the institution’s license. (See section 18 of Capital Adequacy Regulations, 2000.)
Capital adequacy ratio for core capital equal to 8% of risk-weighted assets plus off-balance-sheet exposure. (See section 19 of Capital Adequacy Regulations, 2000.)
Risk-weighted assets are determined by multiplying outstanding value of assets, minus allowances for losses/depreciation, by prescribed risk weight factors of such assets, which are set out in Schedule 2 of the Capital Adequacy Regulations 2001. For example, accounts with banks in OECD countries are assigned a lower risk weight than those in non-OECD countries.
2% of general loan portfolio plus:
• 31-60 days overdue: 5% of loan amount
• 61-90 days overdue: 25%
• 91-180 days overdue: 50%
• Over 180 days: 100%
Required minimum liquid assets must be 20% of demand deposit liabilities. Maximum ratio of loans to deposits is 80% of total deposits. (See section 8 of Liquid Assets Regulations, 2000.)
The total amount of savings and deposits may not exceed 5 times the amount of members' share capital contributions and general reserves.
Maintain a core capital comprised of members' share contributions, 20% of retained earnings and 10% of savings yearly until the capital base reaches US $787,000 (Tsh 800 million)
• 1-30 days overdue: 10% of net outstanding balance
• 31-90 days overdue: 25%
• 91-180 days overdue: 50%
• Over 180 days: 100%
• All other current loans: 1%
Permitted: Accepting and issuing letters of credit, drafts, bills, etc.; checking, buying and selling foreign exchange and gold, loans, acquiring securities. (See section 48 of 1997 Regulations.)
Applicants for banking licenses must clearly state to the Bank of Tanzania if the applicants intends to offer financial services beyond traditional banking services. (See section 10 of 1997 Regulations.)
Limited to 25% of bank’s core capital. Such loans must be approved unanimously by disinterested members of the Board of Directors. (See sections 15-16, 20 of the Concentration and Other Exposure Regulations, 2001.)
Non-bank Financial Institutions
Microfinance Company
Permitted: Accepting savings and passbook deposits from the public, making micro-loans
Prohibited: Foreign exchange business, investment in enterprise capital, opening current accounts, purchase or acquisition of land, participation in underwriting and placement of securities
For a single borrower: Unsecured loans limited to 3% of microfinance company’s capital; secured by personal guarantees limited to 1% of its core capital. The deposits of a Microfinance Company in a single bank or financial institution shall not exceed 25% of the core capital of the Microfinance Company nor 5% of the total liabilities of the bank or financial institution.
Microfinance Companies shall not grant or permit to be outstanding advances to directors or employees, nor to their family members or related businesses as defined by the Act or by the Concentration & Other Exposure Limits Regulations, 2001
Non-bank Financial Institution
Permitted: Provide credit to consumers and businesses, act as an investment bank by underwriting debt or equity securities of other companies, creating mutual funds. Deposit-taking allowed.
(See section 55 of 1997 Regulations.)
Prohibited: For non-deposit taking non-bank financial institutions, checking is prohibited. (See section 3 of 1991 Act.)
Single borrower (law is silent on group of borrowers): unsecured loans limited to 1% of core capital; secured limited to 3% of core capital.
(See section 14 of 2003 Amendments.)
Limited to 25% of bank’s core capital. Such loans must be approved unanimously by disinterested members of the Board of Directors. (See sections 15-16, 20 of the Concentration and Other Exposure Regulations, 2001.)
Quarterly and yearly balance sheet, income statement and cash flow statement must be published and submitted to Director of Banking Supervision. (See section 4 of The Publication of Financial Statements Regulations, 2000 and section 16 of 1991 Act.)
Deposit Insurance Fund controlled by a Deposit Insurance Board. Bank of Tanzania determines amount to be contributed but it must be not less than 1% of the average of the bank or financial institution’s total deposit liabilities for the preceding 12 mos. (See section 25(4) of 1991 Act.)
Deposit Insurance Fund controlled by a Deposit Insurance Board. Bank of Tanzania determines amount to be contributed but it must be not less than 1% of the average of the bank or financial institution’s total deposit liabilities for the preceding 12 mos. (See section 25(4) of 1991 Act.)
Non-bank Financial Institution
On-site surveillance by Bank of Tanzania staff approximately once a year at the head office of each bank.
Quarterly and yearly balance sheet, income statement and cash flow statement must be published and submitted to Director of Banking Supervision. (See section 4 of The Publication of Financial Statements Regulations, 2000 and section 16 of 1991 Act.)
Deposit Insurance Fund controlled by a Deposit Insurance Board. Bank of Tanzania determines amount to be contributed but it must be not less than 1% of the average of the bank or financial institution’s total deposit liabilities for the preceding 12 mos. (See section 25(4) of 1991 Act.)
Cooperatives/Credit Unions
Savings and Credit Cooperatives
Field inspection and examination of individual SACCOs by district cooperative officers and examination of externally-audited financial accounts by the Registrar of Cooperatives. (See Randhawa and Gallardo 2003.)
Submission of reports to Ministry of Cooperatives. (See Randhawa and Gallardo 2003.)
Tax Treatment
Taxes on Income
Taxes on Transactions
Taxes on Payroll
Treatment of costs, provisions, reserves
Other
General Applicability
General Applicability
Corporate income tax rate (2005): 30%; Individual income tax rate: 0%-30%. [All information in this section from PricewaterhouseCoopers, 2005.]
VAT: 20% (Standard).
Employer: 26%.
The current tax regime does not permit provisions for possible loan losses to be recorded as an allowable expense in a bank’s Statement of Income and Expenses for tax purposes. Thus, banks face a major disincentive to comply with Bank of Tanzania prudential standards and internationally accepted sound banking practice by setting aside adequate reserves to protect against anticipated loan delinquencies. (See Randhawa and Gallardo 2003.)
