Tanzania’s growing economy and dynamic Small and Medium-sized Enterprise (SME) sector present compelling opportunities for specialized capital deployment. For international financial institutions and local investment houses looking to establish a Debt Fund in local currency (TZS), the journey begins with securing the necessary regulatory foundation: a Fund Manager License from the Capital Markets and Securities Authority (CMSA).
This article outlines the crucial, non-negotiable legal and regulatory milestones required to successfully launch a regulated investment vehicle in Dar es Salaam.
1. Phase 1: Securing the CMSA Fund Manager License
The CMSA, the statutory regulator for capital markets, requires any entity managing securities portfolios to obtain an Investment Adviser’s Licence, specifically restricted to the Fund Manager category. This process is governed primarily by The Capital Markets and Securities Act, Cap. 79 R.E. 2023, and its subsidiary licensing regulations.
Key Requirements for Licensing:
- Application Forms: The process formally begins with the submission of CMSA Form No. 3 (Application by a Company for an Investment Adviser’s Licence) and CMSA Form No. 5 (Application for a Representative Licence) for each authorized representative.
- Corporate Governance: The applicant company must meet stringent governance standards, including:
- A Board of Directors comprising a minimum of three members.
- At least one third of the board must be independent and non-executive directors.
- Strict guidelines on related-party and concurrent directorships.
- Key Personnel: All directors and key officers are subject to the CMSA’s rigorous “fit and proper” test. This requires certified identification, academic qualifications, comprehensive professional profiles, and mandatory police clearance certificates.
- Operational Readiness: The CMSA demands board-approved, formal documentation demonstrating operational integrity, including:
- An Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) Policy.
- Detailed Operations and Internal Controls Manuals.
- A robust Risk Management Framework.
- Inspection and Audit: The licensing culminates in a CMSA review, including potential physical inspections of the premises and systems, and the pre-appointment of a qualified Compliance Officer and an independent External Auditor.
The license, once granted, is typically valid for one year and must be renewed annually.
2. Phase 2: Establishing and Authorizing the Debt Fund
With the Fund Manager license secured, attention shifts to structuring the Debt Fund itself, a TZS-denominated vehicle tailored for the growing SME market.
Structuring and Documentation:
The choice of fund structure is crucial:
- Collective Investment Scheme (CIS): Suitable if units are to be offered to the public, requiring the appointment of a licensed Trustee and Custodian, and the approval of a full Prospectus by the CMSA.
- Private Closed-End Fund: Suitable for targeting sophisticated or institutional investors, often structured as a company or limited partnership. This requires authorization under evolving regulations governing private equity and venture capital funds, and the drafting of a Private Placement Memorandum or Information Memorandum.
Critical Regulatory and Legal Compliance:
The fund establishment phase involves navigating multiple regulators beyond the CMSA, creating a complex, multi-layered compliance requirement:
| Regulator | Compliance Requirement | Legal Mandate |
| CMSA | Fund authorization, Investment Policy approval, and review of Offering Documents (Trust Deed/Memorandum). | Capital Markets and Securities Act |
| Bank of Tanzania (BoT) | Registration or licensing if the fund’s activities are categorized as non-deposit-taking microfinance lending, pursuant to the Microfinance Act. | Microfinance Act, Cap. 407 |
| Financial Intelligence Unit (FIU) | Compliance with all AML/CFT obligations, including due diligence on investors and borrowers, and suspicious transaction reporting. | Prevention and Combating of Corruption Act |
| BRELA | Formal registration and enforcement of security interests (collateral, charges) over borrower assets. | Business Registrations and Licensing Agency |
| TRA | Advanced tax planning to optimize investor returns, covering withholding tax on interest, VAT, and capital gains. | Income Tax Act |
3. Partnering for a Seamless Launch
Successfully navigating the Tanzania regulatory landscape—from corporate structuring and licensing to multi-jurisdictional fund setup—requires specialized expertise.
Our firm provides comprehensive legal partnership, offering fixed-fee support for each critical phase: from preparing the initial CMSA application to finalizing the Trust Deed and guiding you through capital-raising tranches.
By partnering with local experts who understand the intersection of corporate finance, capital markets, and regulatory compliance can ensure a robust, compliant, and accelerated market entry.
The author is Sunday Ndamugoba , a partner at RIVE&CO, he can be reachable at sunday@rive.co.tz
Disclaimer: This article provides general information and does not constitute legal advice. Regulatory fees and requirements are subject to change. Readers should seek professional legal counsel before undertaking any licensing or fund establishment process.