Bank of Tanzania Takes Action Against Online Lending Scams and Fraud

The Bank of Tanzania has launched measures to combat online lending fraud following the recent arrest of individuals involved in a Ponzi scheme disguised as a movie promotion agency. In the wake of increased scrutiny, the BoT has proposed new regulations aimed at improving oversight in the microfinance sector, focusing on consumer protection and local ownership.

The Bank of Tanzania (BoT) has distanced itself from recent online fraud scandals, taking steps to combat digital fraud. Following a police crackdown, 17 individuals were detained for alleged involvement in the Leo Beneath London (LBL) operation, which masqueraded as a movie promotion agency while operating a Ponzi scheme. People were reportedly recruited to pay for a program promising earnings through viewing movie clips and recruiting others, which has hallmarks of a classic pyramid scheme.

The scandal has intensified scrutiny on the BoT to tackle misconduct within the microfinance sector that has proliferated recently. On February 24, the central bank issued a public statement clarifying that it had no affiliation with LBL, refuting circulating claims of official approval for their operations. The statement, attributed to Governor Emmanuel Tutuba, emphasized that legal measures were initiated against LBL officials for engaging in unauthorized financial activities.

In response to these challenges, the BoT has proposed new regulations for microfinance services, inviting public feedback until June 30. The updated regulations will supersede those established in 2019 and encompass operational standards designed to enhance consumer protection and eliminate unfair lending practices. New stipulations will require digital lenders to host their primary data servers within Tanzania’s boundaries.

Additionally, the new policies will restrict lenders from managing multiple platforms simultaneously and dictate that Kiswahili must be used as the primary language for transactions, with English as an optional secondary language. For entities not accepting deposits, minimum capital requirements vary based on foreign ownership, ensuring local companies are prioritized in the microfinance sector.

Further regulatory scrutiny will address aspects such as lending policies, collateral requirements, repayment terms, and compliance with consumer protection laws. Non-citizens interested in entering the microfinance service market will need to establish a local company, with constraints on foreign employment numbers unless under specific conditions authorized by the central bank. The BoT is committed to fortifying the microfinance landscape and safeguarding against fraudulent activities, aiming for increased regulatory oversight and local engagement.

In summary, the Bank of Tanzania is taking decisive action to curb online lending scams by implementing stricter regulations in the microfinance sector. The recent arrests related to Leo Beneath London highlight the need for enhanced consumer protection and regulatory oversight. The proposed regulations aim to bolster local involvement in microfinance operations while mitigating the risks associated with digital lending and fraudulent schemes. While these steps signal progress, continued vigilance and collaboration among stakeholders are essential for sustained improvement.

Original Source: www.zawya.com