The Legal Framework for Digital Lending by Tier 2 Microfinance Service Providers in Tanzania: Assessing Applicability and Enforcement Challenges

Digital lending through mobile applications has become a major source of credit for individuals and small traders in Tanzania, but it has been accompanied by high and poorly disclosed costs, the harvesting of borrowers’ telephone data and abusive methods of debt collection. This article examines the legal framework that regulates digital lending by non-deposit-taking (Tier 2) microfinance service providers in Mainland Tanzania and asks whether that framework is applicable to the lenders it is meant to govern and capable of being enforced against them. Using doctrinal legal research supplemented by a limited comparison with Kenya, it analyses the Microfinance Act, the Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations, 2019, the Bank of Tanzania (Financial Consumer Protection) Regulations, 2019, the Guidelines on Fees and Charges, 2024, the Guidance Note on Digital Lenders, 2024, the Personal Data Protection Act, the Electronic Transactions Act and the National Payment Systems Act, and evaluates them against the public interest theory of regulation, the distinction between entity-based and activity-based regulation, and responsive regulation. The article finds that the rules specific to digital lending are contained in a guidance note rather than in regulations, although the Microfinance Act empowers the Bank of Tanzania to make regulations on digital microfinance business; that the price of credit is controlled by disclosure alone; that the binding rules on personal data and debt collection are general and fragmented, with inconsistent sanctions; and that the conduct rules bind only licensed providers, leaving unlicensed and foreign-hosted lenders largely outside the framework. The claim is one about statutory design, established by doctrinal analysis, and not about how the regulators perform in practice. The article recommends binding digital microfinance regulations under section 60(2)(q) of the Act, an activity-based regulatory perimeter, a defined standard of usurious lending, targeted amendment of the Personal Data Protection Act, a single code of collection practice, consistent sanctions and formal coordination between the regulators.