Fintech sandbox to boost Tanzania’s startup ecosystem

According to the Tanzania Startup Ecosystem Status report 2023, fintech startups currently account for 8.83 percent of the 842 known startups in Tanzania, contributing significantly to 9,888 jobs.

Speaking with The Citizen, CEO of the Tanzania Startup Association, Mr Zahoro Muhaji said the launch of the Fintech Regulatory Sandbox will help in addressing long-standing barriers that have hindered innovation.

"It offers a flexible environment for startups to test their products with reduced regulatory burdens, fostering innovation and enhancing market access.

This initiative is a significant milestone in our journey towards driving socio-economic development through technology.

"Such sector-specific regulatory sandboxes will streamline the regulatory process for innovators, enhance cross-sectoral learning, and support the development of solutions that address Tanzania's diverse challenges," he said.

Mr Muhaji added with the sandbox in place, fintech startups can now pilot their products within a controlled and regulated scope, boosting their potential to contribute significantly to Tanzania's growth.

He further called on other sector regulators across various industries, including health, agriculture, energy, insurance, and transport, to capitalise on this momentum to establish sector-specific regulatory sandboxes in their sectors by making use of the National Framework for Regulatory Sandboxes.

For her part, Co-founder of Binary Labs, Catherinerose Barretto highlighted that the sandbox could be a game-changer for Tanzania's fintech ecosystem, offering software developers access to application programming interface (API) endpoints for locally developed fintech applications.

“Software developers will benefit by using it to test drive applications from prototypes to final deployments,” she said.

She also noted the potential for increased innovation, investment and economic growth in the startup ecosystem.

“Successful innovations in the sandbox can be scaled up more easily, with the potential to expand beyond Tanzania to other markets in the region,” she added.

A Co-founder and Chief Executive Officer of Mipango App, Ms Lilian Makoi, praised the framework for reducing regulatory barriers, allowing for innovation and testing in a controlled environment.

“This framework fosters innovation and ensures consumer A, crucial for building trust with our users,” she said.

Ms Makoi believes this initiative will encourage more startups to enter the market, drive competition, and lead to cutting-edge financial solutions tailored to Tanzanians' needs.

For his part, a serial entrepreneur, Mr Michael Nyamwero, emphasised that despite taking time, the sandbox is a step in the right direction.

“Introducing this sandbox will significantly ease the process of moving forward,” he said, noting it offers an excellent opportunity for regulators and innovators to collaborate, ensuring product safety and community impact.

With similar sentiments, a founder of Tembo Plus, Mr Victor Joseph, said the sandbox provides a pathway for young innovators to test ideas in a supportive environment.

“Obtaining a license often involves high costs and substantial capital.

This is the best opportunity for recent graduates in fintech who don’t have enough capital,” he said.

Meanwhile reached for comment, BoT Director of Financial Deepening and Inclusion, Kennedy Komba, told The Citizen that the Bank of Tanzania (BoT) has issued the Bank of Tanzania, Fintech Regulatory Sandbox Regulation 2024 aimed at creating an enabling environment for innovative financial services and products that emanate from financial institutions regulated by the BoT.

The regulation was published on July 5, 2024, and gazetted in Government Notice 540 of 2024.

He said that the regulation is designed to promote Fintech innovations to be tested and deployed in a live environment that is within the regulatory purview of the BoT using specified parameters and a timeframe for being in the regulatory sandbox.

“The overarching objective is to create an enabling regulatory environment for deployment of financial technologies that have the potential to introduce specific financial service solutions that are relevant to the country context” he said.

He stressed that it was specifically intended for financial services technology that falls within the confines of the BoT ‘s regulatory mandate.

Given this, he said the Sandbox is expected to be launched before the end of the year.

According to him, once the Sandbox commences operations it will start to admit applications from Fintech entities to test the minimum viable projects.

The application process will be via a portal in the BoT website.