On 19 December 2025, the Bank of Tanzania (BOT) issued the Banking and Financial Institutions (Non-Interest Banking Business) Regulations, 2025 (Regulations) under Government Notice No. 688.
These Regulations aim to facilitate the growth of Shari’ah-compliant financial services while ensuring strong governance, transparency, and risk management. This development is significant for banks, financial institutions, and investors seeking to participate in Islamic finance within Tanzania.
Key Definitions
The Regulations introduce important definitions, most noteworthy are:
- ‘Non-interest banking business’ means a banking business whose products and services are wholly and exclusively compliant with Shari’ah.
- ‘Non-interest banking window’ means a branch or dedicated unit of a conventional bank or financial institution that provides products and services that are Shari’ah compliant.
- ‘Non-permissible income’ means income accruing to a non-interest bank or non-interest financial institution or non-interest banking window in a way that is not compliant with Shari’ah.
Application Requirements
Entities intending to establish a non-interest banking business must comply with the Banking and Financial Institutions (Licensing) Regulations, 2014 (as amended) and demonstrate Shari’ah compliance in all transactions.
Conventional banks seeking to open a non-interest banking window must, after receiving prior written approval from the BOT, submit a detailed feasibility report, including but not limited to:
- proposed Shari’ah-compliant products and services;
- Shari’ah Advisory Charter;
- projected balance sheet and income statement for the first three years of operation; and
- policies for Shari’ah compliance and procedures of the non-interest banking window.
Profit-sharing and Non-permissible Income
The Regulations provide guidance on financing structures, profit-sharing arrangements, and the treatment of non-permissible income. Non-interest banks must maintain records of profit-sharing arrangements and set aside reserves to mitigate potential losses. Any income earned in a manner not compliant with Shari’ah must be kept in a separate account and donated to approved charitable organisations, with strict prohibitions on any direct or indirect benefit to the bank or its affiliates.
Governance and Shari’ah Compliance
The Regulations require the establishment of a Shari’ah Advisory Committee to guide compliance and advise on product approval, disposal of non-permissible income, and other Shari’ah-related matters. Boards of directors are tasked with ensuring adherence to Shari’ah principles, implementing internal controls, and adopting risk management frameworks tailored to non-interest banking. Internal audit functions must include Shari’ah compliance reviews, and risk management systems must address the unique risks inherent in non-interest banking operations.
Reporting and Penalties
Banks must report non-interest banking activities to the BOT at prescribed intervals, publish detailed financial statements that reflect Shari’ah-compliant activities, and disclose any non-compliance incidents.
Non-compliance with obligations set out in the Regulations may attract penalties, including suspension of operations, revocation of licences, prohibition from declaring or paying dividends and disqualification from holding any position in any non-interest bank, financial institution or banking window in Tanzania.
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