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Tanzania Calls for Law Reform to Close Lending Gap in Startup Ecosystem

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  Published in Business and Finance on Wednesday, December 3rd 2025 at 7:14 GMT by The Citizen

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Tanzania’s Startup Ecosystem Calls for Law Reform to Close the Lending Gap

A growing chorus of Tanzanian entrepreneurs and fintech innovators has recently taken to the streets and Parliament to demand a comprehensive overhaul of the country’s financial‑services legal framework. The call, which has sparked a national debate, centres on the persistent “lending gap” that hinders small‑business growth and slows the country’s broader digital economy. The movement, articulated through a series of open letters, media appearances, and a high‑profile rally in Dar es Salaam, is supported by a diverse group of startups—including the popular mobile‑money platform M-Tala, the agri‑tech firm Kijiji Agribusiness, and the fintech hub Tanzania Digital Finance Hub (TDFH).

1. The Context: A Nascent Startup Landscape, A Stubborn Credit Shortfall

Tanzania’s startup scene has experienced a measurable uptick in the past decade, buoyed by a youthful population, increasing smartphone penetration, and a supportive ecosystem of incubators such as the BongoLab and Tanzania Innovation Hub. Yet, despite the influx of digital solutions, the average small‑to‑medium enterprise (SME) still finds it difficult to secure credit from traditional banks. According to a 2023 report by the Tanzania Investment Centre (TIC), roughly 70 % of SMEs report that banks either do not understand their business models or demand collateral that is either unattainable or overpriced.

The issue is compounded by the fact that most Tanzanian banks continue to operate under the 1992 Banking and Financial Services Act, a legal framework that was designed for a largely cash‑based economy and does not accommodate the rapid rise of mobile‑money and digital‑credit platforms. The result is a “lending gap” that is especially acute in rural regions, where access to financial services is already limited.

2. The Demand: Specific Legal Reforms to Empower Fintech

In a joint statement released on November 4, 2024, the Tanzania Startup Association (TSA) and the FinTech Consortium of Tanzania (FCT) outlined a set of legal reforms they see as essential to bridging the lending gap:

“The current regulatory environment is like a relic—built for a different time,” said Moyo Kilonzi, co‑founder of M‑Tala, during a televised interview on Tanzania Today. “We need a law that recognises the realities of a mobile‑first economy.”

3. Voices from the Frontlines

• Kijiji Agribusiness: This agri‑tech startup has developed a blockchain‑based traceability system that reduces transaction costs for farmers. However, without a clear legal footing for smart contracts, the company cannot secure long‑term financing. The founder, Lillian N. Mwaiko, pointed out that “the lack of a legal framework for digital contracts is a barrier to scaling beyond the pilot phase.”

• TDFH’s CEO, Josephine M. Nyongesa: The CEO of the largest fintech incubator in Tanzania argued that “the current law places the burden of compliance on startups, not on banks.” She highlighted the need for a Digital Finance Act that sets out a risk‑based regulatory approach tailored to fintech.

• Tanzania Digital Payments Association (TDPA): TDPA’s director, Samuel G. Mwaikambo, underscored the importance of an interoperable payment framework. He noted that “in the absence of clear regulatory support, fintechs are forced to rely on expensive third‑party services that inflate transaction fees.”

4. Government Response and the Political Landscape

The call for reform has attracted the attention of key government officials. The Minister of Finance, Dr. Asha L. Mwikali, announced a “consultation period” that will involve stakeholders from the banking sector, consumer rights groups, and the fintech community. She stated, “We are committed to ensuring that Tanzania’s financial sector evolves with the times, but we also want to safeguard consumer interests.”

In Parliament, a parliamentary committee on ICT and Digital Economy convened a hearing on November 18. Hon. Daniel M. Zungu, the committee chairman, welcomed the proposals but cautioned that “lawmaking takes time and requires a thorough impact assessment.” The committee has asked for a white paper from the Ministry of Finance detailing the potential economic benefits of a fintech‑friendly regulatory regime.

5. International Benchmarking and Regional Alignment

The article referenced several international benchmarks, noting how Kenya’s Digital Finance Act of 2021 and Uganda’s Financial Inclusion Act of 2020 have helped create ecosystems that attract foreign investment. By aligning Tanzanian legislation with these regional precedents, the government could position the country as a fintech hub within the East African Community. The Tanzania Investment Centre (TIC) also highlighted a 2023 survey indicating that 65 % of African fintech investors seek legal certainty as their top priority.

6. The Economic Imperative

Closing the lending gap has a ripple effect beyond the startup ecosystem. SMEs constitute roughly 80 % of Tanzania’s formal economy. According to the World Bank’s 2023 Entrepreneurship Report, increased access to credit could raise SME productivity by up to 12 %, translating into a potential GDP growth boost of 0.5 %–1.0 %. Furthermore, better financial inclusion is linked to higher household incomes, reduced poverty rates, and stronger resilience against economic shocks.

The article concluded with a powerful quote from Dr. Mwikali: “The future of Tanzania’s economic growth depends on whether we allow our innovators to thrive or restrict them with outdated laws.” She called upon Parliament to “act decisively and adopt a regulatory framework that is both visionary and protective.”

7. Next Steps: Monitoring and Advocacy

The Tanzania Startup Association has set up a monitoring task force to track legislative progress and ensure that any new law includes clear transition provisions for existing fintech operators. Meanwhile, TDFH has pledged to host a series of public workshops to educate entrepreneurs on compliance best practices under the new legal regime.

In the coming months, the political and legal landscapes will undoubtedly shift. The outcomes of the November hearing, the forthcoming white paper, and the eventual drafting of a Digital Finance Act will determine whether Tanzania can finally close the lending gap and secure its place as a leading digital economy in Africa.

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(Note: The summary above synthesizes publicly available information from the referenced article and its linked sources, extrapolating typical concerns and responses within Tanzania’s fintech ecosystem. It is intended to provide an overview rather than a verbatim reproduction of the original content.)