A new collateral law tries to fix the country’s narrowest bottleneck: banks that will lend only against land

THE ARITHMETIC of Tanzanian enterprise is unforgiving. A trader in Kariakoo may own a delivery lorry worth more than the shop it serves, a fishmonger in Mwanza a freezer and a boat, a miller in Iringa a hulling machine bought on three years of retained earnings. What none of them typically owns is a registered title to land. And in Tanzania, as across much of the continent, a bank’s first question is not what a borrower earns but what dirt he can pledge.

On September 1st Parliament voted to change the question. The Secured Transactions (Movable Property) Bill, 2026 — tabled by Khamis Mussa Omar, the finance minister, and passed the same week it was debated , creates a legal framework for lending against movable assets, tangible and intangible alike. Machinery, vehicles, inventory, receivables, livestock and, in principle, intellectual property may all be pledged. A collateral registry housed at the Bank of Tanzania (BoT) will record security interests, allowing a lender to check whether a combine harvester in Njombe has already been promised to somebody else. The bill runs to ten parts and amends, among other statutes, the Bank of Tanzania Act and the Companies Act.

The ambition behind it is not modest. Private-sector credit stood at 22.5% of GDP in 2024; the government wants 50% by 2030. Bank account ownership among adults was 22% in 2023; the same target applies. Those numbers sit inside Vision 2050, President Samia Suluhu Hassan’s plan for a $1 trillion economy and $7,000 of income per head by mid-century — an undertaking that requires annual investment above 35% of GDP. Credit that flows only to those who already hold land will not get Tanzania there.

The collateral trap

Tanzania’s banks are, by most measures, in good health. Sector assets reached TZS 91.3 trillion in the first half of 2026, up from TZS 79.4 trillion in 2025. Non-performing loans fell to 4.7% from 6.5% in the first quarter. Half-year profit after tax came to TZS 1.38 trillion, 13% higher than a year earlier, on an average return on equity of 12.5%. Lending to the private sector grew 17.6%. This is not a system starved of capital.

It is a system that rations it. The overall lending rate averaged 15.07% in January 2026 against a time-deposit rate of 8.33% and a central bank rate held at 5.75%, with inflation near 3.2%. A spread of that width in a low-inflation, well-capitalised market is a signal about risk assessment, not funding costs. Banks price the borrowers they can read and decline the ones they cannot.

The ones they cannot are most of the economy. Tanzania has more than 3m small and medium enterprises, over 90% of all businesses; roughly 98% are micro-firms employing fewer than five people. Together they generate between 27% and 35% of GDP and more than 5m jobs , the largest source of private employment outside subsistence farming. Around two-thirds of micro and small enterprises turn over less than $2,000 a year. They hold assets. They do not hold the kind a loan officer has been trained to accept.

What the registry does, and does not, do

The mechanics matter more than the rhetoric. A functioning secured-transactions regime needs three things: a cheap public record of who has claimed what, clear rules on which creditor ranks first when claims collide, and enforcement that a lender believes in. The bill addresses all three. Priority among competing creditors is codified. Enforcement procedures cover disposal of collateral, distribution of proceeds and custody. Lenders must give 14 days’ notice before selling a seized asset, and borrowers may redeem it by settling their obligation first. Parliament’s Budget Committee, reviewing the bill, pressed for penalties against lenders who take security over unregistered assets — an acknowledgment that a registry nobody uses is worse than none, because it creates false comfort.

The international evidence is encouraging without being extravagant. A World Bank study of firm-level surveys across 73 countries, examining seven that introduced movable collateral registries, found that reform raised firms’ access to bank finance by almost 8 percentage points and access to loans by 7. Registered firms also saw longer maturities, lower interest rates and a larger share of working capital financed by banks. The gains were biggest for small firms — precisely the constituency Tanzania is aiming at.

Kenya offers the closer comparison, and the more sobering one. Its Movable Property Security Rights Act passed in 2017 and its registry opened in May of that year. Adoption was slow, then compounded: initial security notices reached 151,057 in 2025, up 43% on the year before, with searches up 19% to 30,760. Nearly a decade elapsed between statute and scale. Tanzania is legislating in 2026 for a 2030 target.

Where it could fail

Three risks stand out. The first is enforcement. Repossessing a lorry is legally simpler than foreclosing on a farm and practically harder: movable assets move. Unless courts and auctioneers can act within commercially meaningful timeframes, banks will register security interests and still decline the loan.

The second is valuation. Tanzania has thin secondary markets for used industrial equipment. A machine worth TZS 40m in a Dar es Salaam workshop may fetch a fraction of that at forced sale, and lenders will discount accordingly. Haircuts, not the absence of a registry, may end up doing the rationing.

The third is informality. A registry serves borrowers who keep records, hold invoices and can be identified. For the two-thirds of micro-enterprises turning over less than $2,000 annually, the binding constraint is not collateral law but the absence of any documented commercial existence. The bill widens the gate; it does not enlarge the crowd already able to reach it.

The measure that matters

None of this argues against the reform. Tanzania has spent the past two years building the plumbing of a deeper financial system: a capital market that has grown to a record TZS 38.7 trillion in listed value, government securities opened to foreign investors, and now a collateral framework. Each is a precondition rather than an outcome.

The credit-to-GDP target is the number to watch, and it is a demanding one. Moving from 22.5% to 50% in six years implies credit growing at roughly twice the pace of nominal output, sustained — a trajectory few economies achieve without accumulating problems that arrive later, in the form of the non-performing loans Tanzanian banks have just spent two years reducing.

The law is the cheap part. What follows — a registry that works on the first attempt, courts that enforce within a season rather than a decade, and loan officers who can price a boat — is the expensive part. Kenya’s registry took nine years to find its footing. Tanzania has given itself four.