Policy, Regulatory and Supervisory Environment for Microfinance in Tanzania

This paper discusses the formulation of the National Microfinance Policy (NMP) for Tanzania, and the development of the legal, regulatory and supervisory framework for microfinance in the country. The paper discusses:

• The need to mitigate poverty and provide all inclusive, sustainable financial services;
• Financial sector reforms initiated in the country;
• The Government's decision to mainstream microfinance services;
• The process of formulating the NMP, its underlying principles and features;
• Two approaches to the legal, supervisory and regulatory framework:
  • The earlier, bureaucratic approach;
  • The systematic, participatory approach.
• Amendments introduced to the legal framework;
• Guidelines provided for the regulation and supervision of microfinance.

The paper also discusses the way forward as follows:

• There is a need to enhance access to financial services by the low-income population;
• Second generation reforms will implement microfinance regulations corresponding to the new regulatory framework;
• Microfinance regulations will be disseminated among microfinance institutions and other stakeholders;
• Funding requirements of the above process pose a major challenge;
• Prudential regulation and supervision are expected to contribute towards the growth of the financial sector.

The paper concludes by discussing:

• The advantages of the participatory approach;
• The need for constant review of the framework;
• The role of the Bank of Tanzania in supporting the microfinance industry.