Tanzanians now to access loans with movable assets as collateral

Dodoma. Tanzanians will soon have more options for securing loans as the government proposes a new legal framework allowing a wider range of movable assets to be used as collateral.

The Secured Transactions (Movable Property) Bill, 2026, which was approved by the Parliament yesterday, seeks to establish rules for using movable property to secure loans, potentially widening access to finance for individuals and businesses without conventional fixed assets such as land and buildings.

“The aim is to increase access to credit for citizens, thereby promoting economic growth and reducing poverty,” the Bill states in its explanatory memorandum.

The proposed law would allow borrowers to pledge both tangible and intangible movable assets as security, expanding the range of property that could be used when seeking financing. The framework would also cover proceeds arising from collateral, including money generated through sales or other forms of disposal, collections, leasing, licensing and insurance compensation.

Despite the significant reforms taken place in the Tanzania’s financial sector, one of the challenges facing the sector has been the absence of specific legislation recognising the rights and obligations of lenders and borrowers in credit transactions involving movable assets as collateral. Such situation has resulted into the same collateral being used to secure multiple loans without other lenders having access to the information, thereby contributing to an increase in non-performing loans.

At the centre of the proposed system would be a Collateral Registry to be established within the Bank of Tanzania (BoT) for registering security interests in movable property and maintaining records of such interests. The registry would provide a central record of assets pledged as collateral, allowing lenders to establish whether property has already been used to secure another loan, according to the Bill.

The proposed system would also allow members of the public to search information in the registry after submitting an application and paying the prescribed fee.

Under the Bill, where competing security interests are enforceable against third parties, priority would generally be determined according to the order in which the interests are registered.

Surrender collateral

The Bill also proposes rules covering what happens when a borrower defaults. A lender could take steps to seize and dispose of pledged movable property after a borrower fails to fulfil a contractual obligation or where circumstances specified in the agreement allow enforcement.

However, the proposed law distinguishes between situations in which the borrower has agreed in the loan contract to surrender the collateral without a court order and those where such an agreement does not exist. Where the borrower has agreed to surrender the collateral without a court order, the lender could enforce the security without seeking judicial authorisation.

Where there is no such agreement, the lender would require a court order before taking possession of the collateral.

Once enforcement begins, the lender could dispose of the asset through sale, leasing, licensing, auction, tender or another method specified in the loan agreement.

The proposed law would, however, require lenders to protect the value of the collateral.

14-day notice

Before disposal, the lender would generally have to give at least 14 days' notice to the Bank of Tanzania, the borrower and any other person with an interest in the collateral.

The notice requirement would not apply to certain categories of assets, including perishable goods, property likely to lose substantial value if not sold quickly, assets carrying high maintenance or storage costs, and goods intended for sale, including agricultural produce and livestock.

The proposed law would also give borrowers an opportunity to save their assets before they are disposed of. At any time before a lender disposes of or takes ownership of collateral, the borrower or another lender could redeem the asset by fulfilling all obligations secured by it and paying reasonable costs incurred by the lender in relation to the collateral.

The Bill gives priority to the borrower's right to redeem the collateral over another person's right to do so.

Borrowers could also negotiate with lenders to renew their loans before the collateral is disposed of or taken over.

Parliament endorses

The Bill was endorsed by the Parliament yesterday although some precautions were provided to ensure it brings intended benefits.

The Parliament’s Budget Committee said the enactment of the proposed law, among other things, will close the existing gap that has allowed lenders to provide loans secured against movable assets without a clear regulatory framework.

“Although the committee has ensured that the law protects borrowers against the sale of their assets without their consent or without following the prescribed procedures, challenges will remain in its implementation and oversight,” the committee stated in its report presented to the House yesterday.

“The committee calls on the Ministry of Finance, through the Bank of Tanzania, to fully enforce the provisions of this law in order to curb any abuses that may arise. In addition, all lenders who use unregistered assets as collateral should face stringent action, including the revocation of their licences, as provided for by law,” it added.

The committee urged that the regulations should establish simple and accessible procedures for verifying ownership of movable assets for all Tanzanians, so that the proposed law can achieve its objective of increasing access to credit and capital for Tanzanians who own and operate small businesses outside the formal economy.