The National Payment System

In its simplest form, a payment system in Tanzania is a facility that ensures circulation of money. This includes payment instruments, banking and money transfer procedures, and interbank fund transfers.

Legislation in Tanzania

Payment Systems in Tanzania are regulated by the following legislation:

The National Payment System Act, 2015 (The Act); Payment Systems (Licensing and Approval) Regulations, 2015 (The Licensing Regulations); and Payment System (Electronic Money) Regulations, 2015 (Electronic Money Regulations). The Act

The Act provides the legal framework for payment systems to operate in Tanzania. The Act is an all-encompassing law for licensing, compliance, enforcement, and matters of liability for breach of the law. It allows companies, other than banks and financial institutions, to operate payment systems in Tanzania by obtaining a licence from the Bank of Tanzania (the BoT).

Banks and financial institutions that operate payment systems by virtue of their banking business are required to simply obtain approval from the BoT to issue and operate electronic or written instruments for ordering transmission or payment of money (i.e. payment instruments).

Similarly, in order to be able to issue money that is stored electronically in an instrument or device, the Act requires non-banks or financial institutions licensed as payment system providers to obtain an electronic money issuer licence.

Additional requirements are imposed on non-bank or financial institutions that offer payment system services. The Act requires non-bank/financial institutions applying for the licence to issue electronic money to set up a separate legal entity (in form of a trust) for issuance of electronic money; and in order to be able to issue electronic money, a trust account to be maintained by the trust entity must be opened for management of customers' money.

Regulatory framework

The BoT regulates national payment systems in Tanzania. It is vested with the power to grant or refuse the prescribed licences, approvals, and basically has the mandate to regulate, supervise, investigate and oversee operations of payment systems in Tanzania.

It is important to note that in its supervisory role, the BoT works closely with other regulators and Government agencies in order to implement the provisions of the Act and its regulations.

Licences and Licensing requirements

By way of summary, the following are the licences issued in respect to payment systems:

Payment...