Comparing two loan offers, line by line

Two offers for the same TZS 1,500,000

Your shop (duka) in Moshi needs TZS 1,500,000 of stock before December, and two licensed microfinance lenders will lend it, but not on the same terms. Both charge interest (riba) on a reducing balance and want monthly payments; after that, almost nothing matches. The lenders and their terms are made up for this example. The arithmetic and the rules are real.

On paper B looks better: a lower rate, and an installment about half the size of A's. Neither of those tells you which loan is cheaper. For that you need three numbers from each offer: the cash that actually reaches you, the total you hand back, and the true yearly rate that links the two.

The installments above are standard reducing-balance figures, rounded to the shilling. The loan calculator will reproduce them, though its totals can be a few shillings off the ones below, because this guide rounds each installment before adding them up. If flat and reducing interest are new to you, start with what a loan really costs. And before you weigh two lenders against each other, check that each one is licensed.

Line 1: the cash that reaches your hand

Neither lender puts TZS 1,500,000 in your hand. A takes its fee and the insurance at payout: 1,500,000 − 37,500 − 15,000 = TZS 1,447,500. B takes its fee and holds back the savings: 1,500,000 − 22,500 − 150,000 = TZS 1,327,500.

The savings work differently from the fees, because they come back to you. Regulation 23 of GN 679, the Bank of Tanzania's 2019 regulations for non-deposit-taking (Tier 2) microfinance lenders, covers compulsory savings (akiba ya lazima), cash collateral and cash guarantees. A lender that takes such money must keep it in a separate bank account and must not use it “for lending or any other purpose”. It must refund it “upon fulfilment of his loan obligation”. Individual money lenders may not take compulsory savings at all.

So B's TZS 150,000 is still yours, but you cannot spend it for a year. That is why it appears twice in the comparison: it cuts the cash you can use now, and it comes back at the end.

Line 2: the total you hand back, and the cost in shillings

The cost is what you pay back, less the cash you received, less anything returned to you. For A: 1,744,908 − 1,447,500 = 297,408. For B: 1,862,712 − 1,327,500 − 150,000 = 385,212. That figure is the interest plus every deduction that does not come back, so fees and insurance are inside it.

Counted in shillings, A is cheaper by TZS 87,804. But A lends you the money for six months and B for twelve, and a shilling total does not allow for that.

Line 3: the true yearly rate, for loans of different lengths

The true yearly rate (the effective annual rate) starts from the cash you received. Find the monthly rate at which your installments exactly repay that cash, counting any savings that come back at the end, then compound it over 12 months. Because it starts from cash in hand, every fee is inside it, and a six-month loan and a one-year loan end up on the same yearly scale.

By this measure B is the cheaper money, by a wide margin. It costs more shillings mainly because you keep the money twice as long. A's rate is higher to begin with, and its fees make it worse: 3.5% of the loan disappears on day one and has to be earned back over just six installments.

B's savings are not free either. Without the TZS 150,000 lock-up, B's true yearly rate would be 55.7%, so holding back a tenth of the loan for the whole year adds almost 14 percentage points.

You shouldn't have to do this sum alone. Regulation 39(2) of GN 679 lists what a Tier 2 loan agreement must contain, and the list includes the nominal annual rate (b), all other fees (c), an effective annual rate that counts every fee (d), the sum of all payments (f) and the method used to compute interest (g). Compulsory savings are not a fee, so the rate stated for B may leave them out and land nearer 55.7%. If a lender's figure is far from yours, ask to see how it was worked out.

For a sense of scale, banks' lending rate for loans of up to one year averaged 15.41% a year in February 2026, according to Table 2.3.1 of the Bank's March 2026 Monthly Economic Review. That is an interest rate for bank loans, not a true yearly rate worked out from cash in hand, so treat it as a benchmark rather than a like-for-like figure.

What if you only need the money for six months?

Suppose the stock sells through by June and you could clear B after six installments. Regulation 42(3) of GN 679 gives a borrower from a Tier 2 lender the right to repay early, in whole or in part, “without advance notice and without being penalized”. Regulation 42(4) adds that once you have paid in full ahead of time, you owe no “interest for the remaining period to maturity”.

Cleared early, B costs TZS 280,985. That is less than A's TZS 297,408, and TZS 104,227 less interest than running B for the full twelve months. The catch is cash flow: in month six you need TZS 982,355 at once, the sixth installment plus the balance. After that, the TZS 150,000 of savings is due back to you.

The table assumes no early settlement fee, and guideline 15 of the Bank's 2024 fee guidelines allows one only if the loan agreement clearly states it. Read the early-repayment clause in both offers before choosing; fees a lender cannot charge explains how such a fee sits with regulation 42(3). If you have other debts too, the guide to getting out of debt you already have puts early repayment into a wider plan.

Can you pay the installment in a bad month?

Now set each installment against your income. A takes TZS 290,818 a month for six months; B takes TZS 155,226 for twelve. If your shop clears TZS 600,000 a month after stock and rent, A's installment is about 48% of that and B's about 26%. The affordability calculator shows how much of your income a repayment can safely take.

If you do miss one, two rules come into play. Under Regulation 44(2) of GN 679, once a single installment has gone unpaid for a day, the lender must treat the entire loan, not only that installment, as past due in its records. And a late penalty can be charged only if the agreement provides for one (fees guideline 16(1)). What happens if you miss a payment walks through the days that follow.

Checks on each line of an offer

The flat-rate row matters most when you compare. Had B's 3.5% a month been charged flat, its twelve installments would be TZS 177,500 each and the interest TZS 630,000, against TZS 362,712 on a reducing balance. Ask each lender, in plain words, which method it uses: flat or reducing balance. The full list of banned and permitted charges is in fees a lender cannot charge.

Who these rules cover: the Microfinance Act 2018 “shall apply to Mainland Tanzania” (section 2), and GN 679 is made under it. The 2024 fee guidelines apply to Tier 2 lenders on the Mainland (guideline 4). The Financial Consumer Protection Regulations, as amended in 2025, apply to all financial service providers licensed or supervised and regulated by the Bank, unless the Bank prescribes otherwise. SACCOS and community microfinance groups have separate regulations of their own; VICOBA, SACCOS or a microfinance lender explains how the three differ.

Running the numbers on your own two offers

1. Ask each lender for its repayment schedule and its key facts statement. Regulation 39(2)(e) of GN 679 requires a schedule showing the principal, interest and fee parts of each installment and its due date. Regulation 27 of the Financial Consumer Protection Regulations requires a key facts statement, signed by you, attached to the agreement.
2. For each offer, write down the amount on the agreement, every deduction at payout, any savings held back, the installment, how many installments there are, and whether they are weekly or monthly.
3. Enter them in the compare offers tool: the cash you receive, any fee you pay separately (for example in cash at the office), the installment, the number of installments and how often. It shows the total you pay, the cost, the cost per TZS 1,000 received and the effective annual rate, for up to three offers.
4. The tool has no box for money returned at the end, so compulsory savings need care. Enter B's cash as TZS 1,327,500 and the tool counts the savings as lost, showing about 93% a year, as dear as A. Enter TZS 1,477,500 and it ignores the lock-up, showing about 56%. The true rate lies between the two; for this offer it is 69.4%.
5. Set each lender's stated effective annual rate beside yours, then set each installment beside your income before you choose.

If a lender will not put its figures on paper before you sign, you are free to take the other offer. Once you have signed, a charge that breaks one of the rules in the table of checks above is a complaint for the lender first and then for the Bank's Sema na BoT service; your rights as a borrower covers that route.

Sources

• Microfinance (Non-Deposit Taking Microfinance Service Providers) Regulations, 2019, GN No. 679, regulations 23, 39, 42 and 44 — Bank of Tanzania
• Guidelines on Fees and Charges for Microfinance Service Providers, 2024, guidelines 4, 13–17 — Bank of Tanzania
• Bank of Tanzania (Financial Consumer Protection) Regulations, 2019, GN No. 884, regulations 11, 23, 26 and 27
• Bank of Tanzania (Financial Consumer Protection) (Amendment) Regulations, 2025, GN No. 298
• Microfinance Act, 2018 (Act No. 10 of 2018), section 2 — Bank of Tanzania
• Sema na BoT — Bank of Tanzania complaints portal
• Monthly Economic Review, March 2026, Table 2.3.1 (lending rates for February 2026) — Bank of Tanzania

What changed

• 29 September 2026: Rewritten around a new pair of offers (TZS 1,500,000 over 6 and 12 months) instead of the numbers used in the cost guide. Corrected the early-repayment statement: the old text said paying off a flat-rate loan early usually saves nothing, but under Regulation 42(3)–(4) of GN 679 a Tier 2 borrower may repay early without penalty and owes no interest for the remaining period, and an early settlement fee may be charged only if the agreement clearly states it (fees guideline 15). Corrected the comparison method: the old example set costs of TZS 740,000 and TZS 585,421 against different amounts of usable cash (TZS 980,000 and TZS 900,000), which overstated the gap; offers are now compared on cash in hand, total repaid and the true yearly rate. Corrected the treatment of compulsory savings, which Regulation 23 requires to be kept separately and refunded, so they are now counted as returned. Dropped the old offer quoted at a flat 12% a month: providers the Bank licenses (or supervises and regulates) must use the reducing balance method unless the Bank prescribes otherwise (Financial Consumer Protection Regulations, regs 2 and 11(4), as replaced in 2025). Added a table of fee and disclosure checks from the 2024 fee guidelines, the early-payoff case, how to enter compulsory savings in the compare-offers tool, the Mainland scope of the rules, the complaint route and seven sources.
• 24 September 2026: Added references to the Bank of Tanzania's regulations and a list of sources.
• 23 September 2026: First published.

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