Small loans in Tanzania: microfinance institutions, cooperatives and council funds
Tanzanian microcredit is organised by the Microfinance Act of 2018 into four tiers, from deposit-taking institutions overseen by the Bank of Tanzania down to VICOBA, and supplemented by interest-free council loans reserved for groups of women, young people and persons with disabilities.
The 2018 Microfinance Act in brief
This law brought order to a sector that had long been lightly regulated. It sorts providers into four tiers depending on whether they take deposits, and assigns their oversight to the Bank of Tanzania, the Tanzania Cooperative Development Commission or local authorities.
Tiers 1 and 2: institutions licensed by the central bank
Tier 1 covers microfinance banks that take deposits. Tier 2 brings together companies and individuals who lend without collecting savings, including many digital players, all of whom need a licence from the Bank of Tanzania to operate legally.
Tier 3: the SACCOS
Savings and credit cooperatives, very common among teachers, Kilimanjaro coffee growers and council employees, lend their members a multiple of their savings. Their supervision falls to the Tanzania Cooperative Development Commission rather than to the central bank.
Tier 4: VICOBA and savings groups
Community groups save every week and lend the common fund among members according to their own rules. How they work between members is explained on the page about lending between individuals in Tanzania, notably for VICOBA and upatu rotating savings.
Council loans reserved for three groups
Local councils devote 10% of their own revenue to interest-free loans: 4% for women's groups, 4% for youth groups and 2% for persons with disabilities. Suspended in 2023, the scheme has since resumed with disbursement through the banks.
Active microfinance institutions
BRAC Tanzania, Letshego, VisionFund and banks such as Akiba Commercial Bank and NMB serve micro-entrepreneurs. Group loans with joint liability dominate in the markets of Dar es Salaam, Mwanza and Mbeya, with weekly or monthly repayments.
Digital microloans and licensing
Mobile loans of a few thousand shillings are granted by tier 2 providers. Since its 2024 guidance, the Bank of Tanzania has required fee transparency and respect for personal data, and it publishes the list of apps that have not received its approval.
When a Mwanza trader wants to grow
A trader who has repaid several microcredit cycles can aim for a larger bank loan to expand her business. The steps, collateral and public bodies such as SIDO are presented on the page about business loans in Tanzania.
Microfinance in Uganda, for comparison
Uganda has also structured its sector into tiers, with an authority dedicated to non-bank institutions; the page on microcredit in Uganda shows how it differs from the Tanzanian model of shared supervision between several bodies.
The real cost of a microloan
The advertised rate may be a flat rate calculated on the initial principal, which makes it more expensive than it looks. Compulsory blocked savings, membership fees and insurance must also be added, all stated in shillings in the contract.
Microfinance in Zanzibar
On the islands, savings groups and the Islamic windows of the People's Bank of Zanzibar are widely used by spice sellers and fishermen. Interest-free products based on a trading margin match the preferences of a largely Muslim population.
Microcredit and your credit record
Tier 1 and tier 2 institutions report their loans to licensed credit bureaus. A good track record with BRAC or Letshego can therefore ease a future bank loan, whereas a default on a mobile microloan leaves a lasting mark.
Getting a microloan in Tanzania
- Identify the provider's tier, whether microfinance bank, licensed lender, SACCOS or community group, and check its licence.
- Join a joint liability group or a SACCOS if the institution requires it, and save for the period required.
- Present your NIDA card, a letter from the local leader and a description of your income-generating activity.
- Compare the rate, whether it is flat or declining balance, and the compulsory blocked savings.
- Sign the contract, receive the funds by account or mobile money, then attend meetings and pay on time.
Costs of a Tanzanian microloan
| Item | Level | What makes it vary |
|---|---|---|
| Interest | Set by each provider, often flat rate | Provider tier, term, amount |
| 10% council loans | Interest-free | Group eligibility and council budget |
| Compulsory savings | Share of the loan blocked for the term | Rules of the institution or SACCOS |
| Membership and form fees | Fixed amount in TZS | Institution and type of group |
| Credit insurance | Premium deducted at disbursement | Loan amount and term |
Documents for a microloan in Tanzania
- NIDA card or voter's card
- Recommendation letter from the mtaa or village leader
- Recent passport photos
- Group registration certificate from the council
- M-Pesa statement or sales book showing the activity
- Local business licence if the activity has one
Microcredit pitfalls in Tanzania
- Taking several microloans at once from different institutions to repay one with another, a common spiral in urban markets.
- Mixing up a monthly flat rate with an annual rate, and so underestimating the total cost of a group loan.
- Paying a fake agent who claims to enrol groups in the 10% council loans, when these loans are free of charge.
- Using a lending app that is missing from the Bank of Tanzania list of authorised tier 2 providers.
Tanzanian microcredit: common questions
Who can benefit from the 10% council loans?
They are reserved for registered groups of women, young people and persons with disabilities, subject to age and residence conditions set by the regulations. Applications go to the council's community development office, and the loans carry no interest.
Is a SACCOS as safe as a bank?
A SACCOS is supervised not by the Bank of Tanzania but by the Tanzania Cooperative Development Commission. It is wise to check its registration, audited annual accounts and quality of governance before depositing significant savings with it.
Can I get a microloan without joining a group?
Yes, some microfinance institutions and banks grant individual loans to micro-entrepreneurs with a trading history. They then ask for security, such as household assets, a salaried guarantor or prior savings.
Are Tanzanian mobile loans a form of microcredit?
They are very short-term microloans granted by tier 2 providers or in partnership with banks. They cover one-off cash needs, but their annualised cost is usually much higher than that of a group microloan.