Written by the Kopesha team at Softsamic Company · Published 22 September 2026 · Updated 29 September 2026 · 14 min read · No lender pays for these guides · How we write and check them
What you are putting at risk when you sign
A loan application form has a line for security (dhamana). Whatever goes on that line, and whatever the agreement later names, is what the lender may sell if the loan goes unpaid: the motorcycle, the shop stock, the plot. If you signed long ago and a demand letter is now in your hand, skip ahead to what has to happen before anything is sold.
The papers must name it. For lenders licensed under Tier 2 (the microfinance lenders that do not take deposits), the Bank of Tanzania's rules are in GN 679, issued in 2019. The lender's application form must record "the collateral offered" (Regulation 38(1)(h)). The agreement must carry a notice of the security interest (39(2)(j)), and the lender must keep an up-to-date register of all the collateral it holds (41(2)).
Each Tier 2 lender's lending policy must state which collateral it accepts and its loan limits compared with collateral value (Regulation 37(2)(c) and (g)). So ask for that limit in shillings: "For a motorcycle valued at TZS 3,000,000, what is the most you will lend?"
If you have a choice, offer something you could lose and still keep earning. Imagine a boda boda rider in Mwanza who pledges his motorcycle for a loan to stock his wife's shop. If the shop is slow and he falls behind, the lender can move against the motorcycle, and the daily fares that were meant to repay the loan go with it. A tailor's machines and a fish seller's freezer carry the same risk. When the asset is what the loan pays for, as with finance for a bajaji, that risk comes with the deal; buying a bajaji or motorcycle on credit covers it.
What lenders take as security, and which rules cover each
Who lent decides which rules apply. GN 679 covers Tier 2 lenders only, and only on the Mainland, where its parent Microfinance Act 2018 applies (section 2). The Land Act, Cap 113, governs mortgages of Mainland land, whoever the lender (sections 115 and 191). The Bank's consumer protection regulations reach banks as well as microfinance lenders, and a SACCOS has its own 2019 regulations, GN 675. In Zanzibar, check which law covers your loan first.
| Security | What it involves | The rule to know |
|---|---|---|
| Household or business goods: a fridge, a sewing machine, stock | The items are named in the agreement | Reg 41: notice, an independent valuation and a price floor before any sale (next section) |
| A motorcycle, bajaji or car | The vehicle is named; the lender may also ask to keep the registration card (kadi ya usajili) | The same as goods (Reg 41) |
| A house or land | A mortgage, or your title, customary certificate (CCRO) or lease left with the lender | Reg 41, plus the Land Act's own notice, sale and spouse-consent rules |
| Cash collateral or compulsory savings | Money held back from the loan or paid in by you | Kept in a separate bank account, not used for lending or anything else, refunded when you finish paying (Reg 23(1)–(2)); individual money lenders are barred from taking it (Reg 23(3)) |
| A guarantor (mdhamini) | Another person's written promise to pay if you do not | A written statement of the guarantor's liability (Reg 55) |
| Your group | The other members stand behind each loan | The whole group loan counts as past due if a member defaults and the others do not cover the amount due (Reg 44(3)) |
Leaving a land document in a lender's drawer is security in its own right. The Land Act calls a deposit of a certificate of right of occupancy, a customary certificate, a lease or another agreed land document a "lien by deposit of documents". A written, witnessed promise to charge your land for the loan is an "informal mortgage" (section 117(5) and (6)). Ask the lender which of these you are signing, and get a receipt for any document you hand over.
A SACCOS has two rules of its own under GN 675. Membership shares may not be used as collateral, and a member who pledges property owned by someone else needs a written legal authorisation to use it (regulation 33(3)(b) and (d)). VICOBA, SACCOS and microfinance compared covers how a SACCOS loan works.
What has to happen before anything is sold
One missed installment does not let a lender collect your motorcycle the next morning. Regulation 56(2)(a) requires 14 days' written notice to you before any collection or recovery starts, and the steps below come after that. What happens if you miss a payment covers the stages before this one.
| Step | Goods, a vehicle or stock | A house or land |
|---|---|---|
| Notice before a sale | The notice period written in your agreement (Reg 41(4)); if the item is mortgaged, 60 days after a written demand (Reg 41(3)) | 60 days after a written demand (Reg 41(3)); under the Land Act, 60 days from when you receive a default notice (sections 137 and 142(1)) |
| Valuation | Two figures from a registered independent valuer: market value and forced sale value (Reg 41(6)) | The same, plus a duty to get the best price reasonably obtainable (Land Act section 143) |
| How it may be sold | Public auction (mnada) or private treaty (Reg 41(5)) | Auction or private contract (Land Act section 144(1)(d)); a private sale needs at least 10 days' notice of sale to you (section 142(4)) |
| Lowest price allowed | Not below the forced sale value in the first two auctions (Reg 41(7)) | The same, and a price 25% or more below comparable market prices is presumed to break the best-price duty (section 143(2)) |
| Money left over | Paid to you (Reg 41(8)(c)) | What is left after land rates and taxes, any other mortgages, the sale costs and what you owe the lender is paid to you (Land Act section 147; Reg 41(8)(c)) |
A Land Act default notice must state the nature and extent of the default and what you must do to put it right. It must also say that 60 days after you receive it, the whole debt becomes due and the land may be sold (section 137(2), formerly section 127). The clock runs from receipt, so write down the day it reached you.
For goods that are not mortgaged, GN 679 sets no fixed number of days; the clause in your agreement decides. Find it before you sign, and if it is vague, ask for it to be written in days. The regulations also do not say whether a lender needs a court order to collect pledged goods. They do forbid threatening or using violence or illegal means to recover a debt, and harassing you or anyone else connected with the loan (Regulation 56(2)(b) and (c)). For an occupied home the Land Act is explicit. A lender may not take physical possession of a dwelling house where someone lives except by executing a court order (section 140(5)).
Can you still stop the sale?
For a Tier 2 lender, the notice it must give before any sale is a demand to pay what is outstanding (Regulation 41(3) and (4)). So paying it in full is the way to stop the sale. Before the loan's end date, Regulation 42(3) also lets you repay early, without notice and without a penalty.
For land, section 148 of the Land Act gives you until the lender reaches an agreement with a buyer. Pay all the money the mortgage secures by then, and the lender must hand you a discharge and your title documents.
If paying in full is out of reach, Regulation 41(5) permits a sale by private treaty, so you can ask the lender to let you bring a buyer yourself. Getting out of debt you already have explains how to propose it.
With land, act before the sale. Once someone buys from the lender, Land Act section 145 protects that buyer even if a notice was not properly served. The exception is a buyer who knew or should have known of fraud or dishonesty by the lender. What the Act leaves you then is a claim for damages against the lender (section 145(4)), which is money, not the house. For a home, a court asked before the sale can give you time. Under section 149(1) it may use its section 150 powers, which include adjourning the case and suspending or postponing for up to six months. It can do so where it is highly likely you can pay within a reasonable period and the property is worth enough to cover the whole claim. See a lawyer as soon as a default notice arrives.
How the price is protected, and where the money goes
Regulation 41(8) fixes the order in which sale money is used: first everything outstanding on the loan, then the costs and expenses properly incurred in the sale, and the balance, if any, to you. Say you pledged a motorcycle and owe TZS 1,600,000 when the lender sells it. The valuer puts the market value at TZS 2,800,000 and the forced sale value at TZS 2,000,000, and the sale costs TZS 120,000. Under 41(7), the lender may go below TZS 2,000,000 only after two auctions have failed to beat it.
| Sold at the first auction | Sold at the third auction | |
|---|---|---|
| Price | TZS 2,300,000 | TZS 1,800,000 |
| Allowed? | Yes, it is above the forced sale value | Yes, but only because two auctions failed to reach TZS 2,000,000 |
| To the loan | TZS 1,600,000 | TZS 1,600,000 |
| To sale costs | TZS 120,000 | TZS 120,000 |
| Paid to you | TZS 580,000 | TZS 80,000 |
Ask for the valuation report, the auction dates and a written account of the sale line by line. Without those figures you cannot check the balance that Regulation 41(8)(c) says is yours.
If the sale raises less than you owe, the regulation does not say the rest is cancelled, so read what your agreement says about a shortfall. Charges added along the way have limits. Under Regulation 56(3), no interest, fee or other charge may be collected unless the agreement provides for it. The Bank's 2024 fee guidelines also bar Tier 2 lenders from charging borrowers for "chattel storage and management cost" (guideline 17(2)(e)). Fees a lender cannot charge has the full list.
For a house or land, the 25% test works like this. Say similar houses near you sell for about TZS 60,000,000. A sale at TZS 45,000,000 or less is then presumed to break the lender's duty to get the best price reasonably obtainable at the time of sale (Land Act section 143(1)). The lender can try to rebut that, and you may ask a court to declare the sale void (section 143(2)). A smaller discount does not prove the lender did its duty, and a mortgage clause that tries to exclude these rules is void (section 143(6)).
A family home needs your spouse's consent
Under section 118 of the Land Act (formerly section 114), if a matrimonial home is mortgaged, the mortgage is valid only if the spouse or spouses living there signed the application or mortgage documents. Documents that show they assented also count. The rule covers a customary mortgage too. A matrimonial home is the building where husband and wife ordinarily live together (section 116(2)).
You must tell the lender whether you have a spouse, and the lender must take reasonable steps to check (section 118(2)). A lender that takes your affidavit or written, witnessed declaration on the point is treated as having checked (118(3)). Knowingly giving false information in that declaration is an offence carrying a fine of at least half the loan or at least 12 months' imprisonment (118(4)). On a TZS 20,000,000 loan, that minimum fine is TZS 10,000,000.
If you are the spouse, the consent rule is there for you: a lender should not accept your home as security without your signature or assent. If you learn it has been pledged without your consent, get legal advice at once. Do it before any sale, because of the buyer protection in section 145 described above.
If someone asks you to be their guarantor
A guarantor promises to pay the debt if the borrower does not. Neither GN 679 nor the SACCOS regulations say in what order a lender must pursue the borrower and the guarantor. Do not assume the lender has to try the borrower first: read the guarantee, and ask a lawyer if it is unclear.
Work out the worst case before you agree. Say your cousin asks you to back a TZS 2,000,000 loan repaid monthly for a year at 3% a month, charged on the reducing balance. The installment is about TZS 200,924 a month, TZS 2,411,090 in all. If the payments stop, this is the principal still unpaid, before any interest, penalty or recovery charges the agreement allows:
| Payments made before they stop | Principal still owed |
|---|---|
| 1 | TZS 1,859,076 |
| 3 | TZS 1,564,417 |
| 6 | TZS 1,088,445 |
| 9 | TZS 568,336 |
Put your own figures through the loan calculator, which shows the balance month by month, and decide as if you were the one borrowing.
If you sign for a Tier 2 loan, the lender must hand you a written statement of your liability (Regulation 55). It names the lender and its address, the loan number, the borrower, the amount and the date the loan was granted, and carries your signature. Its collectors may not harass or abuse a guarantor (Regulation 56(2)(b)). Before an approved loan app relies on a guarantor, it must have a means of obtaining that person's consent and issuing the same written statement (digital lenders guidance note, 2024, paragraph 5.1(o)). Where a house is sold, the Land Act's best-price duty is owed to the guarantor as well as the borrower (section 143(1)).
In a SACCOS, a member may guarantee another member's loan only with adequate collateral of their own, such as voluntary shares, savings or time deposits. The SACCOS must explain the liability before the guarantor signs, and if it recovers the loan from the guarantor it must give a written acknowledgement of that repayment (GN 675, regulation 34). Whether you can then get the money back from the borrower is a legal question to take to a lawyer.
A bill on pledged goods has passed Parliament
The Citizen reported on 1 September 2026 that Parliament had approved the Secured Transactions (Movable Property) Bill, 2026 the day before. As reported, it would set up a Collateral Registry within the Bank of Tanzania so a lender can see whether an asset is already pledged, open to public search for a fee. A lender would need a court order to take pledged goods unless the contract says you agreed to surrender them without one. Before selling, it would generally owe at least 14 days' notice to the Bank, the borrower and anyone else with an interest, though perishable goods and some other assets are excepted. You could also redeem the asset before disposal by meeting everything it secures plus the lender's reasonable costs.
We have not confirmed that the bill has been signed into law or that the registry is open. Until that is confirmed, go by the rules set out above. If an agreement you are offered says you will hand over goods without a court order, ask the lender to explain that clause before you sign.
When the last installment is paid
Paying off the loan does not by itself return your security. GN 884, the consumer protection regulations of 2019 as changed in 2025 by GN 298, bind every provider the Bank licenses or supervises. Under regulation 29 the lender owes you a written declaration of full settlement, and it has 30 days from full settlement to have your collateral discharged and returned (29(3), numbered 29(2) before 2025). Questions before you sign lists what the declaration must say, including the release of your security.
Collect everything you handed over: the registration card, the title or customary certificate, the lease, any spare key. For a mortgage over land, the Land Act says the lender must discharge it at your request and cost once all money is paid (section 131(1)). A Tier 2 lender may pass on third-party costs such as a discharge fee, but no more than it actually paid (fee guideline 13(6)).
If the 30 days pass without your papers, complain in writing to the lender first. Every Tier 2 lender must have a complaints desk or officer and display its contact details in its offices (Regulation 54). The next step is the Bank's own complaints service, Sema na BoT. Your rights as a borrower explains the full complaint route and how long lenders have to reply.
Sources
- Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations, 2019, GN 679 (Regulations 23, 37, 38, 39, 41, 42, 44, 54, 55, 56) — Bank of Tanzania
- Microfinance Act, 2018 (Act No. 10 of 2018), section 2 — Bank of Tanzania
- Land Act, Cap 113, as at 1 July 2024 (sections 115–118, 131, 137, 140, 142–149, 191) — TanzLII
- Bank of Tanzania (Financial Consumer Protection) Regulations, 2019, GN 884 (regulation 29) — Bank of Tanzania
- Bank of Tanzania (Financial Consumer Protection) (Amendment) Regulations, 2025, GN 298 (regulations 2 and 29) — Bank of Tanzania
- Guidelines on Fees and Charges for Microfinance Service Providers, 2024 (guidelines 13(6) and 17(2)(e)) — Bank of Tanzania
- Microfinance (Savings and Credit Cooperative Societies) Regulations, 2019, GN 675 (regulations 33 and 34) — Bank of Tanzania
- Guidance Note on Digital Lenders under Tier 2 Microfinance Service Providers, 2024 (paragraph 5.1(o)) — Bank of Tanzania
- "Tanzanians now to access loans with movable assets as collateral", The Citizen, 1 September 2026
- Sema na BoT, the Bank of Tanzania's complaints portal
What changed
- 29 September 2026: Rewritten and moved to the "trouble" category. Corrections: removed the claim that a registered security interest over goods is a public record, since we found no registry for movable property that is open (the Secured Transactions (Movable Property) Bill, 2026 is described instead, as reported, and not as law in force); removed the unsourced claims that valuation, storage, auctioneer's and legal costs are usually added to the debt and that TZS 2 million can become 2.5 million, and replaced them with Regulation 41(8), Regulation 56(3) and the ban in the Tier 2 fee guidelines on charging for chattel storage and management cost (17(2)(e)); removed the unsourced claims that a lender may pursue a guarantor before the borrower, that a secured loan is usually cheaper and larger, and that a shortfall after sale normally remains yours (the regulations are silent on both order and shortfall, so the guide now says to read the agreement or guarantee); replaced a generic default sequence with the notices the law requires (Regulation 56(2)(a), 41(3)–(4); Land Act sections 137 and 142). Added: the forced sale value floor in the first two auctions (Regulation 41(7)); the surplus paid to the borrower (41(8)(c)) and, for land, the payments that come before it (Land Act section 147); the collateral register and lending-policy limits (41(2), 37(2)); cash collateral (23) and group loans (44(3)); SACCOS rules (GN 675 regulations 33–34); spouse consent for a matrimonial home (Land Act section 118, formerly 114); the best-price duty and 25% presumption (143), purchaser protection (145), no possession of an occupied home without a court order (140(5)) and redemption before sale (148); stopping a sale by paying the demand (Regulation 41(3)–(4)) or repaying early before the loan's end date (42(3)); the guarantor rule for loan apps (Guidance Note 5.1(o)); the 30-day return of collateral and the settlement declaration (consumer protection regulation 29 as amended in 2025); worked tables for an auction sale and a guarantor's exposure.
- 24 September 2026: Added references to the Bank of Tanzania's regulations and a list of sources.
- 22 September 2026: First published.
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This guide is general information about borrowing in Tanzania. It is not legal or financial advice about your situation or about any particular lender, and the worked examples are examples, not a quote or an offer from anybody.