On 19 December 2025, the Bank of Tanzania (BoT) issued the Banking and Financial Institutions (Non-Interest Banking Business) Regulations, 2025 (the Regulations) under Government Notice No. 688. This development introduces a robust legal and regulatory framework governing Shari’ah-compliant financial services in the United Republic of Tanzania (URT).
The Regulations apply to:
(a) Full-fledged non-interest banks and financial institutions;
(b) Conventional banks and financial institutions operating dedicated “non-interest banking windows.”
I. Key Definitions and Scope
The Regulations define several critical terms that distinguish this sector from conventional banking:
(a) Non-Interest Banking Business: Banking services wholly and exclusively compliant with Shari’ah (Islamic commercial jurisprudence);
(b) Non-Interest Banking Window: A dedicated unit or branch within a conventional bank providing Shari’ah-compliant products;
(c) Non-Permissible Income: Income earned in a manner inconsistent with Shari’ah principles (e.g., interest), which requires specialized handling;
(d) Investment: A Shari’ah-compliant mode of financing, such as asset-based or risk-sharing arrangements.
II. Licensing and Establishment Requirements
Any entity intending to provide non-interest banking must comply with the Banking and Financial Institutions (Licensing) Regulations, 2014 and meet the following specific criteria:
(a) Ensure that all transactions will be conducted in full compliance with Shari’ah principles;
(b) Provide a feasibility study addressing proposed products, governance, and resource mobilization;
(c) Demonstrate the availability of specialized expertise and facilities to support non-interest operations;
(d) For conventional banks, obtain prior written approval from the BoT before establishing a window.
III. Governance and Oversight
The Regulations strengthen governance by placing primary responsibility on the Board of Directors.
Non-Interest Banking Unit
(a) Conventional banks must establish a dedicated Non-Interest Banking Unit at their head office;
(b) This unit is responsible for policy development, coordination of Shari’ah advisory functions, and ensuring regulatory compliance;
(c) It must ensure that funds are invested strictly in accordance with Shari’ah.
Shari’ah Advisory Committee (SAC)
(a) Every institution must establish a SAC to advise the Board on Shari’ah matters and review products;
(b) The Board must ensure the independence of the SAC and periodically assess its performance;
(c) The SAC is responsible for overseeing the treatment of non-permissible income and submitting quarterly reports to the Board;
(d) The Board must submit an annual assessment report on the SAC’s suitability and performance to the BoT.
IV. Operational and Financial Rules
The framework codifies strict rules for day-to-day financial conduct:
(a) Permitted modes include trading tangible assets and risk-sharing arrangements like partnerships and equity participation;
(b) Institutions must maintain separate books of accounts and records for non-interest banking windows;
(c) Proper records for profit-sharing investment accounts must be maintained;
(d) Reserve accounts must be established to mitigate potential losses, with detailed disclosure obligations for these balances.
V. Treatment of Non-Permissible Income
Strict rules govern income that does not comply with Shari’ah:
(a) Such income must not be treated as part of the institution’s earnings and must be kept in a separate account;
(b) Disposal is restricted to donations to qualifying individuals or charitable organizations;
(c) The institution must not derive any direct or indirect benefit from these donations;
(d) Such disposal must not be treated as part of the bank’s Corporate Social Responsibility (CSR);
(e) The Shari’ah Advisory Committee must oversee and approve the purification process.
VI. Disclosure, Reporting, and Penalties
Transparency is enforced through enhanced reporting and severe sanctions for non-compliance.
Disclosure Requirements:
(a) Disclosure of Shari’ah non-compliance incidents and remedial actions in financial statements;
(b) Publication of methodologies for profit calculation and balances in investment risk reserves;
(c) Submission of periodic reports on non-interest banking activities to the BoT.
Penalties for Non-Compliance:
Failure to comply may result in:
(a) Prohibition from declaring or paying dividends;
(b) Suspension of lending, investment, or deposit-taking activities;
(c) Revocation of banking licenses;
(d) Suspension or disqualification of defaulting directors or officers from the financial sector.
VII. Required Application Documents for a Window
As requested, the following table outlines the specific information required in the Feasibility Report for establishing a Non-Interest Banking Window:
| Document/Information Required | Description |
| (a) Proposed Location | Physical location of the window or dedicated outlets. |
| (b) Product List | Detailed Shari’ah-compliant products and services to be offered. |
| (c) Shari’ah Advisory Charter | Governance framework and mandate for the Shari’ah Advisory Committee. |
| (d) 3-Year Financials | Projected balance sheet and income statement for the first three years. |
| (e) Organization Structure | Proposed hierarchy and reporting lines for the dedicated unit. |
| (f) Commitment Letter | A written commitment to keep non-interest funds and accounts separate. |
| (g) Operational Policies | Detailed accounting, risk management, and Shari’ah compliance policies. |
| (h) Systems Adequacy | Proof that the core banking system can handle Shari’ah-compliant transactions. |
Conclusion
The 2025 Regulations provide a comprehensive framework for ethical banking in Tanzania. Banks currently offering these products must urgently review their governance and accounting systems to ensure full compliance.
Author
Sunday Ndamugoba is a Partner at RIVE&Co in Dar es Salaam. He is reachable at sunday@rive.co.tz
Disclaimer
The contents of this publication are intended for general information purposes only and do not constitute legal, tax, or professional investment advice. We strongly recommend that parties seek bespoke legal counsel to navigate the complexities of the Tanzanian laws.