The Bank of Tanzania (BOT) has published the Bank of Tanzania (Fintech Regulatory Sandbox) Regulations, 2024, marking a significant step to foster financial technology (fintech) innovation in the United Republic of Tanzania. These regulations, made under the Bank of Tanzania Act (CAP. 197), establish a formal process for corporate bodies to test new, innovative financial products, services, delivery channels, or business models in a controlled and under-regulated environment.

Scope and Eligibility

These Regulations apply to:
• A financial service provider licensed by the Bank.
• A fintech company collaborating with a licensed financial service provider.
• A fintech company intending to offer a financial solution on financial products and services regulated by the Bank.
• The activities to be conducted must not be covered by the existing legal framework.

Financial Solutions and Application Process

A financial solution can include a wide range of innovations such as digital payments, digital lending, money transfer and remittance services, digital know your customer (KYC), digital platforms, big data and data analytics, distributed ledger technologies, and artificial intelligence/machine learning applications, among others, as approved by the Bank.

The proposed financial solution must:
• Use new or emerging technology or utilize an existing technology in an innovative manner.
• Bridge a market gap or open up new opportunities.
• Improve accessibility, usage, efficiency, security, and quality of financial services.
The application window for the Fintech Regulatory Sandbox will be on a quarterly basis, with the Bank inviting applicants via its official website. The Bank will evaluate applications and notify applicants of approval or rejection within forty-five days.

Key Testing Provisions

Once approved, a participant must commence testing within two months and complete it within a period of twelve months from the date of approval, although the Bank may grant an extension.

During the testing phase, participants must:
• Comply with the conditions of approval and relevant laws.
• Obtain and maintain consumer's prior consent for participation in the test.
• Adhere to approved customer terms and conditions.
• Ensure customer protection in the event of failure.
• Handle customer complaints and protect personal and financial data.
• Participants are required to submit a progress report to the Bank every three months, detailing milestones, risks, customer complaints, and data protection.

Withdrawal and Exit

The Bank has the authority to withdraw an approval if a participant fails to meet conditions, submits false information, contravenes laws, undergoes insolvency, or is detrimental to customers. Upon withdrawal, the participant must immediately cease provision of the solution, notify customers, and compensate any customer who suffered financial loss.
After testing, a final report must be submitted within thirty days. Upon completion of testing, the Bank may recommend the financial solution for market introduction. However, the Bank may prohibit deployment if testing is unsuccessful, or if there are unintended negative consequences for the public, or potential threats to financial stability.

General Requirements

Participants must maintain proper records for transparency. Data collected must be treated in accordance with the Personal Data Protection Act. The Bank retains the power to monitor compliance, conduct onsite inspections, and issue administrative sanctions, including a warning or suspension from the sandbox for up to one year for non-compliance.

Conclusion

The new Bank of Tanzania (Fintech Regulatory Sandbox) Regulations, 2024, establish a structured framework for testing innovative financial solutions. By providing a controlled environment with regulatory flexibility, the BOT aims to promote technological advancements in the financial sector while ensuring robust customer protection, risk management, and overall financial stability. This is a progressive move to integrate fintech innovation safely into Tanzania.

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