Commentary On Draft Guidelines on Fees and Charges for Microfinance Service Providers as issued by the Bank of Tanzania in 2024

1. The Bank of Tanzania has issued draft guidelines on fees and charges for Microfinance Service Providers (MSPs), in pursuit of its mandate under Regulation 25 and 60 of the Bank of Tanzania (Financial Consumer Protection) Regulations, GN No. 884 of 2019, which provides that BOT has supervisory mandate on MSPs’ conduct and power to issue guidelines for the charges and fees imposed on financial products or services offered by a financial service provider to the public. 
2. The guidelines regulate MSPs and obliges appropriate implementation on the following:
   1. Governance
      1. It bestows governance roles and responsibilities upon the board, senior management and internal audit on management of fair and equitable fees and charges on financial products and services offered to the public.  
      2. The Board is required to approve and periodically review policy and the strategy for imposition of fees and charges and clearly set the roles and responsibilities of senior management, internal organizational structures for the proper management of fees and charges. 
   2. Internal Control
      1. MSPs are required to set up an adequate and appropriate internal control on imposition of fees and charges on financial products and services.
   3. Policy for fees and charges
      1. The guidelines require MSPs to establish policy for imposition of fees and charges.
   4. Lending fees
      1. MSPs are required to charge two categorized fee and charges which are; management fees or charges; and loan restructuring fees or charges. The guidelines allow MSPs to impose a one-off management fee on a new application on a new loan not exceeding 5% of the loan amount or TZS 500,000 whichever is lower. And to impose a one-off loan restructuring fee to the existing loan facilities which shall not exceed 5% of the outstanding amount being restructured.
   5. Permissible fees
      1. MSPs are allowed to charge early settlement or cancellation fee and late repayment penalty only if it was clearly stipulated in the loan agreement together with fees and charges that do not exceed actual costs incurred on photocopies of loan documents and retrieval of documents. 
   6. Restrictions 
      1. MSPs are restricted to impose fees and charges on among others management fees and charges for existing loan facilities; insurance premium above the actual premium charged by the insurer; loan processing; loan application; agent commission. Also restricted to adopt any other name or terminologies for the imposed fees and charges other than the names used in the guidelines unless BOT’s approval is sought prior.
   7. Disclosure
      1. The MSPs are required to publish interest rates, fees and charges, and other related costs at least quarterly in one Kiswahili and one English widely circulated newspapers in Tanzania. 

Crispin Bebwa Mwebesa Esq (Managing Partner) & Adv. Valentina Clifford (Associate)