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Tanzania: The Fintech Regulatory Sandbox Regulations 2023

16 October 2023
– 7 Minute Read


The Bank of Tanzania (BoT) has recently issued draft regulations for establishing a Regulatory Sandbox, the Fintech Regulatory Sandbox Regulations 2023 (Regulations). The Regulations aim to create a conducive environment for innovative fintech to be tested in the market while ensuring adequate measures in place to protect customers.

The Regulations will apply to financial service providers licensed by the BoT, a fintech company collaborating with a financial service provider licensed by the BoT, or a fintech company intending to offer solutions to financial services regulated by the BoT.

The main objective of the Regulations is to enable fintech innovations to be tested and deployed in a live environment within specified parameters and timeframes. The goals are, among other things, to increase the potential for innovative business models that enhance financial deepening and inclusion, to ensure appropriate consumer protection safeguards in innovative products and services, and to assist fintech innovators to graduate from the relaxed to the regulated environment.

Key definitions

  • ‘Cohort’ is defined as ‘a group of innovators that share the characteristics of having been allowed into the sandbox at the same time or period’.
  • ‘Fintech’ is defined as ‘technological innovation to be utilised in the provision of financial services’.
  • ‘Financial Solution’ is defined as ‘any product, service, delivery channel or business model’.
  • ‘Regulatory Sandbox’ is defined as ‘a formal process in which, under-regulated environment firms conduct live tests of new innovative products, services, delivery channels or business models in a controlled environment’.
  • ‘testing environment’ is defined as ‘a real life market environment selected by the participant for testing financial solutions which are not fully compliant with existing legal and regulatory framework’.

Application procedure and evaluation of the application

Under the Regulations, the BoT is mandated to invite qualified applicants to participate in the Regulatory Sandbox. An applicant who intends to participating in the Regulatory Sandbox is required, within 30 days from the date of receiving the invitation, to submit to the BoT an application form, a financial solution risk profile indicating potential risks, causes, effects and control measures in place; and documents supporting the information provided in the application form.

An applicant is required to demonstrate the following to be approved to participate in the Regulatory Sandbox:

  • a financial solution that uses new or emerging technology or innovatively utilises an existing technology;
  • a financial solution that bridges a market gap opens up new opportunities or improves accessibility, usage, efficiency, security and quality of financial services;
  • the adequacy and appropriateness of the assessment done on the usefulness and functionality of the financial solution;
  • the necessary resources to support testing in the sandbox, including the financial resources and expertise to mitigate and control potential risks and losses arising from offering the financial solution;
  • a realistic business plan to deploy the financial solution on a commercial scale after exit from the sandbox;
  • significant risks associated with the sandbox;
  • key performance indicators or other metrics in monitoring the progress of the testing;
  • credibility and integrity;
  • an acceptable exit and transition strategy once the test is completed and
  • a plan to deploy a financial solution upon successful completion of the testing.

Acknowledgement by the BoT of receipt of the application will be given to the applicant within five working days from the date of submission of the application form.

When evaluating the application submitted, the BoT will take into account whether the application conforms to the eligibility requirements, whether the proposed financial solution is genuine and beneficial to customers, the potential for the proposed financial solution to enhance financial deepening and inclusion in the country; whether there are measures in place to safeguard the customer; the adequacy of controls for managing potential risks including money laundering, financing of terrorism and proliferation financing; the applicant’s readiness for testing and exit plan; and whether there are sufficient resources to test the proposed financial solution.

The BoT will then notify the applicant of the evaluation results through a letter of acceptance within 45 days after the closure of the application date. A list of successful applicants will be published on the BoT website. Where an application is rejected, the BoT is obligated to provide the applicant reasons for rejecting it. Moreover, the BoT has the mandate to allow an applicant to re-apply within 30 days from the date on which the application was rejected.

Revocation of approval

At any time before the end of the period for testing the proposed financial solution, the BoT is empowered to revoke approval to participate in the sandbox if the participant:

  • fails to carry out the safeguards;
  • submits false, misleading or inaccurate information or has concealed or failed to disclose material facts in its application;
  • contravenes any applicable laws administered by the BoT;
  • is undergoing or has gone into liquidation;
  • breaches data security and confidentiality requirements;
  • carries on business in a manner detrimental to customers or the public at large; or
  • fails to effectively address any technical defects, flaws or vulnerabilities in the financial solution.

Prior to revoking an approval, the BoT is required to give the participant 30 days’ written notice of its intention to revoke the approval. The applicant is required to show good cause within the time stated in the notice as to why the approval should not be revoked.

Testing of the proposed financial solution

The BoT will run a cohort once in every 12 months. Within one month from receiving the letter of acceptance from BoT, the applicant is required to commence testing of the proposed financial solution. Such tests are required to be completed within nine months from the date of receiving the letter of acceptance.

When testing the proposed financial solution, the applicant is obligated to adhere to conditions stipulated in the letter of acceptance, to safeguard customers against losses through the provision of funds, guarantees, insurance or any other mechanisms, to handle financial consumer complaints and protect personal and financial data; and to submit interim reports to the BoT which include: key milestones achieved, fraud incidents observed and risks identified during testing, any operational challenges encountered and measures taken, a report on customer complaints handling, and any other information that the BoT may require.

Within 30 days of completing testing, the applicant is required to submit a final report indicating the performance of the test, any risks identified and mitigation measures taken, recommendations for appropriate supervision of the financial solution by the BoT, and readiness to deploy the tested financial solution in the market.

Exiting the Regulatory Sandbox

Once the testing period is completed, the BoT may allow the proposed financial solution to be introduced into the market subject to conditions stipulated in the Banking and Financial Institutions Act, the National Payment Systems Act, the Microfinance Act and any other relevant laws.

The BoT may also prohibit the proposed financial solution from being introduced into the market where there are unintended negative consequences for the public, potential threats to the financial system’s stability, or where the testing conducted is unsuccessful based on agreed test measures.

Administrative actions

Non-compliance with the Regulations will result in the BoT taking administrative actions, which may include non-participation in the Regulatory Sandbox for a period of two years from the time of non-compliance, publication of the names of offenders, or reprimands.


This new approach to managing financial innovations by the BoT is a welcomed step that embraces the changes in the global economy sparked by innovation in the digital sphere. The Regulations will bring about a positive change by reducing the time-to-market of fintech innovations and increasing access to finance for innovative startups due to the reduced regulatory uncertainty. The increased availability of innovative products in the market will undoubtedly positively impact the economy by fostering financial inclusion and expanding access to financial services for Tanzanians.