ACCESS TO LOANS IN MICROFINANCE INSTITUTIONS BY

USE OF UNSURVEYED LAND AS SECURITY:

ANALYSIS OF THE LAW AND PRACTICE IN TANZANIA
MAINLAND

By

Eliudy Elifuraha

A Dissertation Submitted in Partial Fulfillment of the Requirements for Award

of the Degree of Master of Laws (LL.M) in Commercial Laws of Mzumbe
University

2016
 CERTIFICATION
The undersigned certify that he has read and hereby recommends for the acceptance
of this work entitled Access to Loans in Microfinance Institutions by use of
Unsurveyed Land as Security: Analysis of the Law and Practice in Tanzania
Mainland of the for award of the degree of Masters of Law requirements for the
(L.L.M) Mzumbe University

Major Supervisor

Internal Examiner

Internal Examiner

Accepted for the Board of Faculty of Law

DEAN- FACULTY OF LAW

ii
 DECLARATION
AND
COPYRIGHT
I, Eliudy Elifuraha, do hereby declare that this dissertation is my own original work
and that it has not been presented and will not be presented to any other University
for a similar or any other degree award.

Signature ___________________________

Date________________________________

©
This dissertation is a copyright material protected under the Berne Convention, the
Copyright Act 1999 and other international and national enactments, in that behalf,
on intellectual property. It may not be reproduced by any means in full or in part,
except for short extracts in fair dealings, for research or private study, critical
scholarly review or discourse with an acknowledgement, without the written
permission of Mzumbe University, on behalf of the author.

iii
 ACKNOWLEDGEMENT
First and foremost, I would like to pay special tribute to the Lord through him all
things are made possible.
It is impossible to mention all those who have in one way or another been supportive
of this work. However, I will attempt to mention a few.
I would like to extend my sincere gratefulness to my supervisor, Dr. Cosmas J, who
has been a true mentor throughout the different stages of my work, without his
expert advice and his unfailing encouragement and patience, this work would have
been very difficult to accomplish. As such, his contribution to my study will not be
forgotten and therefore is highly appreciated.
I wish to acknowledge efforts done by the personnel in Private Institutions for
example Law firms, Financial Institutions, in devoting their time in filling in my
questionnaire during data collection and have given their supports and energy to
encourage me towards the completion of this work.
A personal thank goes to My Brothers and Sisters Nestory Eliudy, Faraja Eliudy,
Emmilian Eliudy and Rehema Eliudy , also special thanks to my Uncle Phesto
Ngaka and her wife Jane Mwakyulu for their supports and encourage me toward the
completion of this work, Hon Odira Amworo, who is currently district magistrate at
Mpanda, Advocate Deusdedit Simbakalia, Nicholaus Nditi , Apolonary, Morice
Julius and Karoli for providing me material support throughout my studies at
Mzumbe University Main Campus.
Finally, I wish to extend my thanks to my Class mate, Kinabo Minja, Dennis Leka,
William Njia, Emmanuel Bwire, David Abdon and Eunice Kangole.

iv
 DEDICATION
This work is dedicated to my Beloved Mother Ester Eliudy and my family, for
sending me to school.

v
 ABBREVIATIONS AND ACRONYMS

ALLER All England Law Reports

CAP Chapter
CBOS Community Bank
DSM Dar es Salaam
ED Edition
FINCA Foundation for International Assistance
GDP Gross of Domestic Product
GN Government Notice
H.C High Court
Http Hypertext Transfer Protocol
i.e. id est
Ibid ibidem
LLM Master of Laws (Legum Magister)
Ltd Limited
MD Managing Director
MFIS Micro-Finance Institutions
MKURABITA Kiswahili acronym for „MPANGO WA KURASIMISHA RASILMALI
NA BIASHARA ZA WANYONGE TANZANIA‟ (the National Strategy
for Growth and the Reduction of Poverty)
NABARD National Bank for Agriculture and Rural Developments
NBC National Bank of Commerce
NGO Non-Governmental Organization
NMB National Microfinance Bank
NO Number
OECD Organization of Economic Corporation Development
ORG Organization
P Page

vi
R.E. Revised Edition, 2002
S Section
SACCOS Savings and Credit Cooperative Societies
SEDA Small Enterprise Development Agency
SHG Self Help Groups
SIDO Small Industries Development Organization
SME Small and Medium Entrepreneurs
TAMFI Tanzania Association of Microfinance Institutions
TLR Tanzania Law Reports
UNO United Nations Organization
US United States
UTT Unity Trust of Tanzania
V Versus
WEF World Economic Forum
WWW World Wide Web

vii
 TABLE OF STATUTES

Principal Legislation
The Bank of Tanzania Act, 2006
The Banking and Financial Institutions Act, 2006
The Banking and Financial Institutions Act, No. 12 of 1991
The Cooperative Societies Act, No. 15of 1991[Cap211R.E 2002]
The Cooperative Societies Act of 2003
The Law of Contract Act, [Cap 345 .R.E 2002]
The Land [Amendment] Act, No. 2 of 2004
The Land Act, No 4 of 1999 [Cap 113 R.E.2002]
The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
The Land Registration Act, [Cap 334R.E. 2002]
The Law of Marriage Act, No 5 of 1971[Cap .29 R.E.2002]

Subsidiary Legislations
The Banking and Financial Institutions (Microfinance Activities) Regulations, 2014
GN No.298 of 2014
The Land Regulation (forms) Regulations GN .No 71 of 2001
Land (Small Mortgages) Regulations, GN .No 75 of 2001
Land (Mortgage) Regulations, GN, No 43 of 2005
The Village land Regulations GN. No. 86 of 2001

Policies
The MKURABITA Policy of 2007,
The National Land Policy of 1995
The National Microfinance Policy, May 2000

viii
 LIST OF CASES

Caunce v. Caunce (1969) 1ALL ER 722

Casborne v. Scarfe (17371) 1 ALK 603
Howard v. Harris (1683) 1 VERN 33.190
Idda Mwakalindile v. N.B.C.Holding Corporation and San Saijen Mwakalindile,
Civil Appeal No. 59 of 2000, Court of Appeal of Tanzania at Mbeya (unreported)
Tanzania Investment Bank and Eric Auction Mart v M/S Ilabila Industries Ltd, John
Momose Cheyo and Mrs. Elizabeth Geleja Cheyo, High Court of Tanzania
(Commercial Division) at Dar es salaam, Commercial Case No. 27 of 2002
(unreported)
Maria Goreti Katura Mutarubukwa v. NBC, Innocent Chacha Magoti Nshoya and
Leonce Benedict Mutarubukwa, Land case No.28 0f 2004, HC, Land Division DSM
(unreported)
National Bank of Commerce Ltd v. B&E Investment Limited and Dorein Francis
Kanemile Commercial Case NO.14 of 2002 High Court of Tanzania Commercial
Division at Dsm(unreported)
National Bank of Commerce v. Dar es Salaam Education and Office Stationary
[1995] TLR 275
NBC v. Walter T Czun Civil Appeal No. 31 of 1995 ,Court of Tanzania at Dar es
salaam(Unreported)
Pearse v. Morns (1869) 5 CH. APP 227, 229.
Royal Bank Scotland plc v. Etridge Case No.28 of 2004, High Court of Tanzania
Land Division at DSM (Unreported).
Santley v. Wilde (1899) 2 Ch 474
Selton v. Slade (1802) 7 VES 265 AT 273

ix
 ABSTRACT
This dissertation is intended to be an analysis of the law and practice on accessing
loans from microfinance institutions by use of unsurveyed land as security in
Tanzania Mainland, and to identify various legal problems facing the borrowers and
lenders when unsurveyed land is accepted as security to the loan transactions.
Unlike any other Dissertation this work comprises five chapters, beginning with
Chapter One, which is the introductory chapter. Chapter Two discusses the
conceptual framework of mortgage creation over unsurveyed land. Chapter Three
addresses the legal regime governing the creation of a mortgage in Tanzania by
using unsurveyed land. Chapter Four is Data presentation, analysis and discussion of
findings while Chapter Five concludes the study with recommendations on what can
be done so as to reap the expected benefits.
This study was motivated by the fact that the Government of Tanzania has worked
hard to ensure that citizens access loans from Microfinance Institutions through
enabling them to create mortgages by using both surveyed and unsurveyed land.
This has been affected through making various legal and policy reforms.
Despite those efforts some of the lending institutions are still reluctant to accept
unsurveyed land as security for loans, occasioning this research to find out the legal
reasons ( both substantive and procedural) why some of lending institutions are
reluctant to accept unsurveyed land as security of loans .
The study has found out that laws are not adequately framed. There are no clear
provisions which address issues of unsurveyed land, and the lack of regulations that
regulate mortgages on unsurveyed land leave a lot of loopholes and gaps on the
existing stipulated provisions.
Finally come recommendations and conclusions on the findings, where the
researcher advises the Government, the Parliament, and the stakeholders on the steps
to be taken in order to facilitate and enact laws and rules which will properly govern
the procedures, rights and duties of parties who involve themselves in transactions
of unsurveyed land to create mortgages in Tanzania.

x
 TABLE CONTENTS
CERTIFICATION ....................................................................................................... ii
DECLARATION........................................................................................................ iii
ACKNOWLEDGEMENT.......................................................................................... iv
DEDICATION ............................................................................................................ v
ABBREVIATIONS AND ACRONYMS .................................................................. vi
TABLE OF STATUTES .......................................................................................... viii
LIST OF CASES ........................................................................................................ ix
ABSTRACT .................................................................................................................x
TABLE CONTENTS ................................................................................................. xi
CHAPTER ONE ........................................................................................................ 1
GENERAL INTRODUCTION ................................................................................ 1
1.1 Introduction ...........................................................................................................1
1.1 Background to the Problem ....................................................................................3
1.2 Statement of the Problem .......................................................................................6
1.3 Research Questions ............................................................................................... 8
1.4 General Objectives .................................................................................................9
1.4.1 Specific Objectives ..............................................................................................9
1:5 Significance of the Study .......................................................................................9
1.6 Literature Review .................................................................................................10
1.6 Research Methodology .........................................................................................24
1.6.1 Research Design ............................................................................................... 24
1.6.2 Area of study .................................................................................................... 24
1.6.3 Unity of inquiry /Sampling size ....................................................................... 24
1.6.4 Sample design....................................................................................................25
1.6.4 Methods of data Collection. ............................................................................. 25
1.6.4.1 Primary data .................................................................................................. 25
1.6.4.2 Secondary Data.............................................................................................. 26
1.6.5 Data Analysis ................................................................................................... 26

xi
1.6.6 Scope of Study.................................................................................................. 27
1.7 Chapterization ......................................................................................................27
CHAPTER TWO ..................................................................................................... 28
CONCEPTUAL FRAMEWORK ON MORTGAGE CREATION ON
UNSURVEYED LAND ............................................................................................28
2.0 Introduction ..........................................................................................................28
2.1 Mortgage ..............................................................................................................28
2.2 History of mortgage..............................................................................................29
2.2.1. Current Practice of Granting Loans in Tanzania ..............................................30
2.2.2 Creation of mortgage .........................................................................................31
2.2.3 Types of Mortgage ............................................................................................31
2.2.3.1 Legal Mortgage ..............................................................................................32
2.2.3.2 Legal mortgage under registered land ............................................................32
2.2.3.3 Legal Mortgage and charge of unsurveyed land ............................................33
2.2.3.4 Simple Mortgage ............................................................................................33
2.2.3.5 Legal charge ...................................................................................................34
2.2.3.6 Equitable mortgage.........................................................................................34
2.2.3.7 Informal mortgage ..........................................................................................34
2.3 Qualities of good mortgage in Tanzania ..............................................................35
3.4 Purposes of mortgage ...........................................................................................36
2.5 Securities ..............................................................................................................37
2.6 Land as securities .................................................................................................38
2.6.1 Mortgagee‟s right of enforcing his security ......................................................39
2.6.2 Right to redeem .................................................................................................40
2.6.2.1The equity of redemption ................................................................................40
2.7 Remedies available when borrowers default ........................................................41
2.8 Discharge of Mortgage .........................................................................................42
2.9Advantage of taking land as security ....................................................................43
2.9.1 Unsurveyed Land as security ............................................................................44

xii
2.9.2 Advantage of unsurveyed Land as security .......................................................45
2.9.3Disadvantages of unsurveyed land as security ...................................................45
2.10 Microfinance (microfinance Institution) ............................................................46
2.11 Conclusion ..........................................................................................................48
CHAPTER THREE ................................................................................................ 50
THE LEGAL REGIME GOVERNING CREATION OF MORTGAGE BY
USE OF UNSURVEYED LAND IN TANZANIA MAIN -LAND .......................50
3.1 Introduction ..........................................................................................................50
3.2 The policy position ...............................................................................................50
3.3 The Statutory Laws Applicable ............................................................................51
3.3.1The Land Act No.4 of 1999 (As amended by the Land (Amendment) Act No.2
of 2004 ................................................................................................................51
3.3.2 Appoint of a receiver of the income of the mortgaged land ..............................52
3.3.3 Sell the mortgaged land .....................................................................................53
3.3.4Lease the mortgaged land ...................................................................................54
3.3.5 Enter into possession of the mortgaged land .....................................................54
3.4. Village Land Act Cap 114 ...................................................................................55
3.5. The Village Land Regulations. GN No. 86 of 2001 ............................................55
3.6 The Banking and Financial Institutions (Microfinance Activities) Regulations,
G.N. No. 298 0f 2014 .........................................................................................56
3.7 Law of Marriage Act, No 5 of 1971 .....................................................................57
3.8 Registrations of Documents Act. Cap 117 ...........................................................57
3.9 Consequences of failure to register Mortgage ......................................................57
3.10 Legal Procedure for Creation of Mortgages on unsurveyed Land .....................58
3.11 Preliminary investigations ................................................................................. 58
3.12 Carrying out Physical verification ..................................................................... 59
3.13 Securing informed consent from spouse/spouses .............................................. 60
3.14 Contractual arrangements ...................................................................................63
3.15 Drafting Contractual Documents........................................................................63

xiii
3.16 Registration of Mortgage Created On Un surveyed Land ..................................64
3.17 Conclusion ..........................................................................................................66
CHAPTER FOUR ....................................................................................................67
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS ....67
4.0 Introduction ..........................................................................................................67
4.1 Unsurveyed Land as Security for a Mortgage ......................................................67
4.2 Ownership proof of unsurveyed land ...................................................................69
4.3 Procedure for creating mortgage on unsurveyed land ..........................................70
4.4 Laws regulating microfinance institutions in Tanzania .......................................72
4.5 Search or inquiring of unsurveyed land ...............................................................75
4.7 Applicability of other document apart from title deed as evidence of ownership.76
4.10 Due diligence conducted by local government authorities ................................77
4.11 Conclusion ..........................................................................................................79
CHAPTER FIVE ..................................................................................................... 80
CONCLUSIONS RECOMMENDATIONS AND OF THE RESEARCH ..........80
5.2 Conclusions ..........................................................................................................80
5.1 Recommendations ................................................................................................80
5.1.1: Recommendations to the government of Tanzania ..........................................82
REFERENCES ........................................................................................................ 84
APPENDIX .............................................................................................................. 89

xiv
 CHAPTER ONE
GENERAL INTRODUCTION

1.1 Introduction
A „microfinance institution‟ means a bank or financial institution which is licensed
by the Bank of Tanzania to undertake banking business mainly with individuals,
groups or micro and small enterprises in the rural or urban areas1

Microfinance institutions are very important in the economic growth of Tanzania,

but despite the existence of institutions like Finca, Pride, Tujijenge and similar
institutions, the majority of Tanzanians are yet to enjoy access to these microfinance
institutions and their services toward growth of the economy2.

Most Tanzanians have never reaped any benefits from their land as collateral for
loans due to the kind of collateral preferred and accepted by the microfinance
institutions as security for loans. Indeed, the preferred type of security and kind of
land they accept is surveyed land rather than unsurveyed land. Clearly it is the type
of land which the microfinance institutions choose as security which is one of the
major problems that preclude the majority of citizens from accessing the available
opportunities for the loan facilities offered by those institutions3.

At the outset most of the targeted groups when these microfinance institutions were
established were people in the lower income brackets. The majority of these people
reside in villages where they own village land4. Since nearly all the village land plots
are unsurveyed, it goes without saying that most villagers own unregistered land
which may be made available as collateral under Rule 50 of the Banking and
1
World Population with access to finance Retrieved from the (http://worldbank.org) accessed on
December 16 ,2015
2
ibid
3
ibid
4
See Item 2.2 of the National Microfinance Policy: Ministry of Finance, United Republic of
Tanzania, May 2000 at P 8

1
Financial Institutions (Microfinance Activities) Regulations, 2004.This Regulation
provides that-
“An institution engaged in microfinance activities may extend credit
accommodations secured against unregistered collateral or non-
traditional security or collateral substitute, such as personal
guarantees, contractual pledging of home or business assets,
compulsory savings or group guarantees where members jointly
guarantee each other‟s loans”.5

The above regulation provide for unregistered collateral among the Collateral
includes unsurveyed land (unregistered land), Unregistered land „is defined by
section 2 of the Land Registration Act as-
“Unregister land other than registered land, the title of land is
unregister, except interest which are to be registered as land charges
on the land register where the detail of ownership do not appear on
any central record of register6.

Unsurveyed land (unregistered land) , its fact that for the people who own
unsurveyed land own under Customary right of Occupancy7. Therefore it should be
known that most of owners of unsurveyed land own land under Customary right of
occupancy. The word unsurveyed land and unregistered land are synonymous.

The low income earning citizens were targeted by the Government in the National
Microfinance Policy of 2000 and the MKURABITA Policy of 2007 to improve their
life standards by facilitating for them access to loans from Microfinance
Institutions. This is due to the fact that they own unregistered collateral and non-
traditional security instruments as provided under Rule 50 of the Banking and
Financial Institutions (Microfinance Activities) Regulations8Due to nature of their
collaterals they own other documents apart from a formal title deed as evidence of
ownership of their land since the land has not been surveyed. It is due to this ground
that some of financial institutions have refused to honor their documents such as
5
Rule 2 of GN. No 298 of 2014
6
S. 2 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
7
S. 115(1) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
8
See Rule 2 of GN. No.298 of 2014

2
sales agreements, residential licenses and any other documents apart from title deed
as the evidence to prove their ownership of the land9.

However some initiatives have been taken by the government to make the life
standards of their citizens improve, Pertinent reforms in the financial sector which
among other things were initiated in the microfinance policy have led the
Government to enact laws which will fit the requirements of the policy in order to
improve economic growth of the country to allow and promote the acceptance of
unsurveyed land as security for loans offered by the microfinance institutions.

Those of the low income brackets who could not afford to access loans from
commercial banks and this objective is achieved by establishing Microfinance
institutions and institutions to offer loans to them by accepting their non-traditional
collateral as security. Through different schemes the Government has devised
MKURABITA and National Microfinance Policy in order to change the fiscal
system to enable the microfinance institutions to issue loans to people within the low
income brackets.10

1.1 Background to the Problem

In the year 2000, the Tanzania Government adopted the National Microfinance
Policy as a means to reduce poverty and spur economic growth .The policy came
at a time when the microfinance sector was underperforming due to a disjointed
legal and regulatory framework. Microfinance institutions were poorly managed and
different laws were being applied to different microfinance schemes11.

9
Lusaga, J.M. (2009). Issuing Residential License to Land owners in Unplanned Settlements in Dar
es Salaam Tanzania: Report by Un-Habit, Shelter branch, Land and Tenure pp 9-31.
10
Bikki R, Joselito G.(2003). Microfinance Regulation in Tanzania: Implications for Development
and Performance of the Industry Africa Region Working Paper Series No.51 pp. 1-5
11
Peter K. and Teresa P. (2015) A new microfinance law for Tanzania? Retrieved at www.clyde.com
on 22/1/2016 at p1

3
There are several reforms in financial institutions which have occasioned changes in
the laws regulating the loan system in the country, which provide for the creation of
the mortgage on both surveyed and unsurveyed land.

The laws regulating the mortgage system in Tanzania were enacted in order to meet
the goals set in the MKURABITA Program (The Property and Business
Formalization Program for Tanzania which is known in Kiswahili as Mpango wa
Kurasimisha Rasilimali na Biashara za Wanyonge Tanzania) as well as to fulfill
what is provided in the National Microfinance Policy).

Among the laws amended was the Land Act which was amended in the year 200412 ,
13
and so was later the Village Land Act and Land (Mortgage) Regulations14 was
issued for the purpose of protecting the interests of the user and the occupiers of the
land. In the result, both the Village Land Act15 and the Land Act16 allow the creation
of mortgages on both surveyed and unsurveyed land. This is evidenced in S. 31(4) b
of the Village Land Act17. In both cases the law provides for the creation of
mortgages on unsurveyed land. S. 115(1) The Land (Amendment) Act18 also
provides that a mortgage can be created on unsurveyed land.

The National Microfinance Policy addresses the provision of financial services to

households, small holder farmers, and micro enterprises in rural areas as well as in
the urban sector.19 The current situation is quite different from that of the previous

12
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
13
The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
14
GN. No. 43 of 2006.
15
See Rule 2 of GN. 298 of 2014
16
S.2 of The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
17
Bikki R, Joselito G.(2003) Microfinance Regulation in Tanzania: Implications for Development and
Performance of the Industry Africa Region Working Paper Series No.51 pp. 1-5
18
Peter K. and Teresa P. (2015) A new microfinance law for Tanzania? Retrieved at www.clyde.com
on 22/1/2016 at p1
19
National Microfinance Policy, item 2.2 Ministry of Finance: United Republic of Tanzania, May
2000 P 8

4
situation whereby there was no any financial institution which provided loans to the
citizens who wanted to put their unsurveyed land as security to the said loan.

Despite the considerable support given by government in recent years, unsurveyed

land being recognized by law as Mortgage still the Microfinance Institutions are not
ready to comply with those laws20.

By considering what has been started above it appears that there is a problem in
enforcing law that regulate unsurveyed as Mortgage. That when customers apply for
loans they find difficult conditions which are not easy to access loans from these
Microfinance institutions.

Most of Tanzanians living in rural areas depend on small and medium enterprises as
well as small scale farming activities to run their daily life, and majority of these
people reside mostly in rural areas and their main asset capable of forming collateral
is land but land in the rural areas is mostly unsurveyed21.

Hence this research find out why microfinance institution is reluctant to accept
unsurveyed land as security for their loans despite provided by the law and to find
out what are the legal reasons or challenges which lead to lender‟s reluctance to
accept customary right of occupancy on unsurveyed land as security for granting
loans.

20
Kenneth, M (2014) Hati za kimila: Mwananchi Newspaper Retrieved on 16 th November 2014 from
the, World Wide Web
http://www.ippmedia.com/frontend/index.php/.itm.c/2.au/articles107818/javascript/page_home.js?l
=69252
21
See item 2.2 of the National Microfinance Policy: Ministry of Finance, United Republic of
Tanzania, and May 2000. P8

5
1.2 Statement of the Problem
The Government in Tanzania has worked hard to ensure that life standards of the
citizens improve 22,and to this end pertinent reforms in the financial sector, among
other things were initiated through microfinance policy initiatives which have led
the Government to enact laws which will fit the requirements of the policy to
improve economic growth of citizens, by allowing access loans from microfinance
institutions through enabling them to create mortgages by using both surveyed and
unsurveyed land. This has been through making various legal and policy frameworks
and reforms. This includes the passing of the Banking and Financial Institutions
Act23, Land Act24, the Village Land Act25 and their respective Regulations.

The position in the National Microfinance Policy26 and MKURABITA Policy27

emphasizes the provision of financial services to the households, small holder
farmer, and micro enterprises in rural areas as well as in the urban sector, this puts
emphasis on the sound development of microfinance institutions for economic
growth28

29
S. 113 (1) of the Land Act provides that, “an occupier of land under a right of
occupancy may by an instrument in a prescribed form create mortgage by use of that
right of occupancy”. For the mortgage created to be effective, it must be

22
Bikki R, Joselito G.(2003) Microfinance Regulation in Tanzania: Implications for Development and
Performance of the Industry Africa Region Working Paper Series No.51 Retrieved on 6th
September 2015 from World Wide Web
https://www.google.com/search?q=Bikki+R%2C+Joselito+G.%282003%29+Microfinance+Regula
tion+in+Tanzania%3A+Implications+for+Development+and+Performance+of+the+Industry+Afric
a+Region+Working+Paper+Series+No.51++pp.+1-5&ie=utf-8&oe=utf-8&client=firefox-b pp. 1-5
23
Act No. 5 0f 2006
24
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
25
The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
26
See item 2.2 of the National Microfinance Policy: Ministry of Finance, United Republic of
Tanzania, and May 2000. P8
27
Tanzania Property and Business Formalization Program, 2007 retrieved on 6 th December 2015 from
WorldWideWebhttps://www.google.com/search?q=Tanzania+Property+and+Business+
Formalization+Program%2C+ +2007&ie=utf-8&oe=utf-8&client=firefox-b-ab p2
28
See item 2.2 of National Microfinance Policy, Ministry of Finance, United Republic of Tanzania,
May 2000 p 8
29
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004

6
registered.30Further the Act adds that, “nothing shall operate to prevent a borrower
from offering and a lender from accepting a deposit of among others a certificate of a
customary right of occupancy”.31 This provision shows that a mortgage can be
created by using among other things, the customary right of occupancy.

With the same effect, the Act also provides that the governing law shall be
customary law which will be applicable to the land in respect of which the
customary mortgage is created.32S. 31 (4) b of The Village Land Act also provides
that, a mortgage can be created on village land33

Despite the above reforms of laws and policies, practice shows that some of
microfinance institutions are reluctant to accept customary right of occupancy so as
to use them as security for mortgage creation. One of such instances was reported in
Mwananchi Newspaper showing how the use of customary right of occupancy
impedes the move to access loans from lending institutions. This was reported as:-
“Njia ya kuwa fanya wakulima wakopesheke ni kuwa dhamini, lakini
mkopaji kutakiwa kuwa na dhamana za mali zisizo hamishika ,hati za
viwanja na masharti mengine ni mambo ambayo yamekuwa na mchango
mkubwa kwa wananchi wanaotumia ardhi ya vijiji kushindwa kupata
mkopo”34

Which is literally interpreted as, the only way to help people living in the rural areas
to access loans is by guaranteeing them through immovable property and title deeds
to their land. However these conditions have been hard to fulfill for people living in
rural areas since they have customary right of occupancy which is granted on
unsurveyed land.

30
S.113 (4) The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
31
S. 113(5) b The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
32
S.115 (1) The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
33
The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002
34
Joseph. Z (2015) Njia ya kuwa fanya wakulima wakopesheke ni kuwa dhamini, Mwananchi
Newspaper retrieved on 27th August 2015, from World Web Wide
https://www.google.com/search?q=mwanachi+news+paper+link.

7
Again it was reported that;-
“Wananchi wamejaribu kuomba mikopo kutoka taasisi za kifedha
ikiwemo za taasisi hizo za microfinance lakini kila wanapofika wana
ambiwa sera za mabenki hazitambui hati za kimila kwa wale wenye nazo
kuwa hatimiliki halali kwa wakopaji ambao wanatumia ardhi ya kijiji
kama dhamana35”

Which can be literally interpreted as citizens have been trying to access loans from
microfinance institutions but are denied for a reason that banking policies do not
recognize customary right of occupancy? As such most of people who intend to use
customary right of occupancy to access loans from microfinance institutions are left
without such facility.

Thus, if the laws and policy advocate for lenders to accept a customary right of
occupancy as security for the creation of a mortgage, the question arises as to why
some of lending institutions are reluctant to accept access to loans in Microfinance
institutions by applicants who pledge unsurveyed land as security. This research aim
to find reasons (substantive and procedural reasons) will which lead some of lender‟s
reluctance to accept unsurveyed land as security for granting loans.

1.3 Research Questions

The research conducted is based on a number of questions as shown here below:
i. Can unsurveyed land attain the basic qualifications of a good mortgage?
ii. What are the legal requirements for credit facilities to be secured by
unsurveyed land?
iii. What are the legal challenges facing unsurveyed land as a loan security?
iv. What are the improvements /recommendations to be adopted in promoting
and improving unsurveyed land as security?

35
Kenneth, M (2014) Hati za kimila; Mwananchi Newspaper on 16 th November 2014
WorldWideWebhttp://www.ippmedia.com/frontend/index.php/.itm.c/2.au/articles107818/javascript
/page_home.js?l=69252

8
1.4 General Objectives
The research is aimed at understanding the reasons behind the reluctance of some of
the Microfinance institutions to accept unsurveyed land as security for granting
loans. It also intended to suggest ways to overcome the legal challenges facing the
microfinance institutions.

1.4.1 Specific Objectives

i. To examine the current framework of land law and to find whether what
provided by the law for unsurveyed land in respect of mortgage is
practically working out.
ii. To examine the legal challenges associated with mortgage provisions with
regard to unsurveyed land.
iii. To explore the legal requirements for credit facilities to be secured by
unsurveyed land.
iv. To recommend reforms on mode of obtaining loan from unsurveyed land.

1:5 Significance of the Study

This study has a number of advantages to researchers, the Legislative arm of the
state, the Government, as well as the service providers and the public at large.
i. To meet the basic requirements /fulfillments of the award of Degree of
Masters of law as per Mzumbe University Education Standard.
ii. The study will help researchers to open their minds on the legal
requirements for lending against securities and especially for credit
facilities to be secured on unsurveyed land.
iii. The research‟s recommendations will be based on how to overcome legal
challenges facing microfinance institutions when granting loans to people
who use unsurveyed land as security to a mortgage.
iv. The Government and the legislative arm of the state also can adopt these
recommendations to overcome the objections of some Microfinance
Institutions which are reluctant to accept unsurveyed land as security and

9
 to meet the legal challenges by harmonizing and amending appropriately
the existing laws on the one hand.

However on the other hand this research is generally intended to be used by

members of the public and for academic purposes.

1.6 Literature Review

This section provides for the important discussion on the topic researched as
provided by various authors of different books through several writings that have
been used in this same study. Most authors have written topics on the creation of
mortgages but have not explained in depth the difficulties and complications facing
these microfinance institutions when accept credit applications on unsurveyed land.

36
Alphonce, M.A.U, and Janeth, F.U. (2011) the authors in their work tried to
discuss a lot concerning the aspect of microfinance law within Tanzania. As their
first concern the authors provide for the concept of security where they discussed
land as security and cite the good attributes of a land security. In this work they
consider different concepts of security. One among them is that land is immovable
security and the above good attributes are difficult to be attained by the owner of
unsurveyed land, on the other hand the authors in their work did not suggest how
those good attributes can be attained in respect of unsurveyed land.

The authors only discuss the main aim of policy (National Microfinance Policy) and
the advantage of land as security but they have not shown the reasons why some of
these microfinance institutions are reluctant to accept unsurveyed land collateral to
be security for their loans.

36
Alphonce, M.A.U, Janeth, F.U. (2011) .Aspects of Banking and Microfinance Law :(1St Ed) pp.44-
49

10
It is the object of the researcher in this work to find out and to suggest procedures for
accessing loans by using unsurveyed land as security from the microfinance
institutions. But also the main issue is to discover why the microfinance institutions
are adamantly reluctant to accept unsurveyed land as security for loans despite the
provisions available under the law.

Tenga W, Sist, J (2015)37Authors in their joint work have argued that registered
rights of occupancy can only be mortgaged in institutions that are approved by the
government. Private money lending is illegal and, that the applicant may access
loans from financial institution which are registered to provide such services instead
of private persons on the basis of their agreement. In case the borrower defaults to
pay back the loan the mortgagee may exercise remedies on the property the right to
sell but with no right to retain the property because their aim is to return back their
money by following the requisite procedures of the laws.

The Authors in their work build their argument on the basis of a mortgage created on
surveyed land by recognized institutions allowed by the laws such as banks, and
they proceed from that premise to the case where an applicant owns unsurveyed
land who also should be enabled to access loans from the same financial
institutions by putting unsurveyed land as security since those institutions are
recognized by the laws and allowed to do banking activities This research goes
further and looks why some of these microfinance institutions are reluctant to accept
unsurveyed land as security for loans despite the fact that they are registered to assist
applicants own unsurveyed land .

37
Tenga W., Sist, J. (2015).Theoretical Foundations of Land Law in Tanzania: Law Africa Publishing
(T) Ltd,Dar-es-Salaam P. 287

11
Ernest B (2013),38 the author in his paper states that “whenever a financial
institution advances money to its clients, it has to take collateral so as to reduce
and/or prevent a total loss of funds and revenue in case the borrower defaults. Thus
collateral offered serves as a protection to the financial institution. Generally security
accepted by financial institutions includes mortgages, pledges, stocks and shares,
land, buildings, guarantees and life assurance policies. Traditionally, banks and non-
banking financial institutions preferred the use of landed property as security for
their loans, even though they find it difficult and long procedure to realize this
security.

Author explains that when financial institutions advance loans they accept security
of land but they find it a difficult and long procedure to realize this security; but the
author in his work did not explain what those difficulties and long procedures are.
Therefore the researcher goes further in this research find why some of the
microfinance institutions are reluctant to accept unsurveyed land as security for
loans and what obstacles the Microfinance institutions are facing in accepting
unsurveyed land as security for a mortgage in spite of the laws which provides
creation of loans on both surveyed and unsurveyed land.

Binamungu, C.S & Ngwilimi, G.S (2006)39 Authors focus on the regulation of
mortgages based on registered land. Three steps have to be taken by the mortgagee
which is provided for a baseline for all mortgagees in order to protect their positions.
Each step taken prevents a harm that would befall the mortgagee and any failure to
observe the steps attracts harm to the mortgagee in case there is default and the
mortgagee wishes to execute the mortgage.

38
Ernest B (2013). Assessment of the Acceptability of Personal Guarantees and Life Assurance
Policies as Collateral for Loans in Ghana: Research Journal of Finance and Accounting: ISSN
2222-2847 Vol.4, No.12, p. 1
39
Binamungu, C.S ,Ngwilimi,G.S.(2006). Regulation of Banking Business in Tanzania: Mzumbe
Book Project,Morogoro.pp.110-119

12
The requirements of consent of the spouse for matrimonial houses, conducting a
physical verification of the landed property as well as other contractual procedures,
if all of them are well observed, will put the mortgagee on the safe side. This will not
be true when the steps are not observed. All these steps are conducted on surveyed
land or registered land.

The author has shown the procedure to be followed and this is in surveyed lands. But
the author has not spoken on unsurveyed land while in his title provide on
regulations of banking business in Tanzania and Microfinance institutions are one
among of the institutions conduct banking activities for example issue loans,
therefore authors they only look banking activities on bases of commercial banks but
they had not discussed on Microfinance institution since these are also regulated by
the same laws.

Therefore this research goes further to look into the regulations governing
microfinance institutions to ascertain whether or not these institutions are protected
by the laws. And if yes why are some of these microfinance Institutions reluctant to
provide service to the customers whose unsurveyed land is pledged as security. This
is what the researcher is striving to determine.

Tenga W, Sist, J (2008),40focused his writings concerning the same issue of land as a
security for mortgages, hence any good security must have the following attributes;
its value must be readily ascertainable and reasonably stable over the years. In this
case, the land which can be stable for a long period should be readily realizable in all
conditions with a simple title which is transferable without undue trouble and it must
be easy for the bank or any other financial institution to obtain a safe and
unquestionable title without trouble and expense.

40
Tenga W., Sist, J. (2008). Manual on Land and Conveyancing in Tanzania: Law Africa Publishing
(T) Ltd, Dar-es-Salaam P. 256

13
On the other hand, land as a good security must be free from liabilities to third
parties arising out of its title and consequently only certain securities should qualify
as security for mortgage. Therefore such qualifications should cover the interests of
the financial institutions in case the borrower defaults to pay back the loans or any
other dispute arising between the parties. Nevertheless, these qualifications are only
found in registered lands.41

Whenever Microfinance institutions advance loans to their clients in exchange to

their collaterals, their argument always is to reduce and/or prevent a total loss of
funds and revenue in case the borrower defaults. Thus collateral offered serves as a
protection to the financial institution. Hence security accepted by financial
institutions includes land. Traditionally, financial institution preferred the use of land
as security for their loans; even though they find it difficult and long procedure to
realize this Security especially unsurveyed land. 42

The author has explained clearly the qualities of good security, however these
qualities are easy to realize in surveyed land than in unsurveyed land. Again author
is silent on how unsurveyed land can attain those attributes of good security, in his
work he did not show on the problems faced by these finance institutions when they
accept security which does not cover the above attributes.

Hence this research looks at legal challenges/problems facing unsurveyed land as a

security in Tanzania and how unsurveyed land can attain those qualities of good
security.

41
Tenga W., Sist, J. (2008). Manual on Land and Conveyancing in Tanzania: Law Africa Publishing
(T) Ltd, Dar-es-Salaam P. 257
42
ibid

14
Us aid Country Profile Property Rights And Resource Governance43The authors
provides that “The most common means of obtaining both formal and informal
access to land are through inheritance, gifts, borrowing from family members, land
allocations from village councils, informal land transactions in urban areas,
allocation from a municipality in an urban , land purchase and squatting.”

The Land Act recognizes the validity of customary rights of occupancy without the
need to issue and register a formal certificate. Theoretically, the certificates are
required to mortgage the land right to secure a loan.

The Village Land Act provides a process for village councils to issue certificates for
customary rights of occupancy. According to the Act, the steps for obtaining a
certificate of customary right of occupancy to village land are:
i. Application for a certificate to the village council by the landholder.
ii. Council review of the application.
iii. Issuance of a letter of offer stipulating development conditions, yearly rent
and other conditions.
iv. The land owner‟s written agreement to these conditions on a prescribed form.
v. Issuance of the certificate.

Certificates have been issued for village land. Notwithstanding these efforts to
provide for title security and creditor protection, due to the sharp limitations on its
transferability, village land is not suitable for as collateral for lending. Moreover,
there is a widespread lack of confidence in the validity of many certificates.

43
Us aid Country Profile: Property Rights And Resource Governance. Retrieved on 11 th January 2016
from World Web Wide
https://www.land-links.org/wp-content/uploads/2016/09/USAID_Land_Tenure_Egypt _Profile-
1.pdf p.10

15
However the authors try to discuss in their paper that the government is trying to
create a favorable condition which could enable the owner of unsurveyed land to
access loans, by using their land and that is the main aim of the government.

The government provides to these kinds of people, certificates and permits which
prove that they are legal owners of those lands (unsurveyed) by issuing a residential
license etc. But still some of Microfinance institutions are reluctant to accept the
application of loans from these people using unsurveyed land as security for their
loans. But this research found out on why some of these financial institutions are
doing that? And under what legal challenges they are facing of which the authors
above did not discuss it?

Fidelis, K. M.(2006)44. Author therein has stated that the Land Act and the Village
Land Act of 1999 as amended conserve the leasehold tenure through the right of
occupancy system, but aim to provide facilities that enable an increased land security
for villagers and pastoralists, as well as possibilities for investments in small holding
farms. The implementation of the land Acts are making progress, albeit slowly, and
the main concern seems to be the question of financing. Other critical issues are,
whether the banks are going to respond to the mortgaging possibilities and thereby
fulfill the strategic visions of investments in the agriculture.

Therefore this research is determined to discover why some of these Microfinance

institutions are reluctant in providing grants/loans, despite the law which provides
creation of mortgage on unsurveyed land. And also seeks to know what the legal
challenges are facing these Microfinance institutions when granting loans for those
who use unsurveyed land as security for mortgages.

44
Fidelis, K. M. (2006). The Challenging Tanzanian Land Law Reform: A study of the
Implementation of the Village Land Act: Retrieved on 10 May 2015 from World Web
https://www.kth.se/polopoly_fs/1.158660!/Menu/general/column-content/attachment/EX-06-
160.pdfEX-06-160/2006, p 5

16
Author in his work he only discussed on the aim of the amendments of the Land Act
and the Village Land Act but in his work never touched on the legal reasons which
cause some of these Financial Institution to be reluctant to accept unsurveyed land
as security for loans despite of amendment of both laws Land Act and Village Land
Act.
K.G. Karmakar (2009),45The Author discussed on the purposes of establishing these
Microfinance institutions. The main purposes are to shape the poor people to scale
up their operations in an affordable manner. Microfinance is not for charity, it is
there to make business.

According to the author, “the poor cannot be left to the tender mercies of those who
look down upon them by subjecting them to microfinance as „discretionary‟ funding
and the members of SHGs as „beneficiaries‟. Truly, they are all partners in all
common endeavors. Microfinance in the form of bank SHG linkage model has been
able to inspire hope to the lives of thousands of rural people; women and youths in
particular, also enabling them to elevate their family livelihood in a way of
alleviation of poverty through savings and entrepreneurship. For banks, it is a
business opportunity and for bank officials, it is an opportunity to extend their rural
46
client without much risk, as the recovery levels exceed 95 per cent. The SHG
members of today could turn out to be clients for several financial products over the
years. For the NGOs/NABARD officials, policies have to be developed to harness
market forces and yet help the poor to survive and advance. The United Nations
(UN) celebrated 2005 as the year of Microcredit and our Endeavour.

The Author addresses the aims of establishing the microfinance institutions as

geared to enable people who live in low standard of life to access loans from
Microfinance institutions. Most of these people living in the village land have their
only security to secure loans from this financial institution is land .When these

45
Karmakar, K.G.(2009).Microfinance in India :New Delhi SAGE Publication India Pvt Lt, p43
46
ibid

17
people seek for loans from these Microfinance institutions, some of these financial
institutions are reluctant to grant loans services to these people who live in village
land whom their credit facilities secured by unsurveyed land 47. Anyhow, the
responsibility of these microfinance institutions is to consider such kind of people
when they ask for loans than any other clients.

Although the work is not based in Tanzania nor does it explain the problem, it is still
relevant because of the way it helps the researcher to understand the main aim of
establish this microfinance institutions despite the author has not touch on the
reasons behind this Microfinance institutions are slow to grant loans to these people
use un surveyed land as security for their loans.

This research has conducted and has found out why some of these Microfinance
institutions are reluctant to provide or grants/loans, despite their presumed main
objective of extending loans in order to eradicate poverty. The research also seeks to
know what are the legal challenges facing these microfinance institutions when
granting loans for those who use unsurveyed land as security for a mortgage.

MKURABITA REPORT, (2007)48The main idea is that many people living in poor
conditions as well possess wealth in the form of land, minor businesses and other
domestic agricultural properties, but this wealth is not legally recognized or
formalized. If such kinds of people do not have access to secure title to land, or work
in unregistered and unregulated business, they may have little access to capital to be
able to expand their economic activities beyond their own local area. Therefore, the
main idea of MKURABITA is to make it possible, affordable and desirable for these
kinds of people to operate within the formal, legal system so that they can be assured

47
Karmakar, K.G.(2009).Microfinance in India :New Delhi SAGE Publication India Pvt Lt, p43
48
Tanzania Property and Business Formalization Program, 2007 retrieved on 6 th December 2015
from World wide web https://www.google.com/search?q= Tanzania+Property+and+Business+
Formalization+Program%2C+ +2007&ie=utf-8&oe=utf-8&client=firefox-b-ab p.2

18
on the use of their assets to increase their participation in not only local markets, but
also national and global ones.

The overall goal is to reduce poverty by an idea of giving them formal title to their
property to help them improve their business and/or agricultural activities for better
and brighter economic opportunities. The idea focuses on people who live in village
land which is not surveyed and conduct minor business and/or agricultural activities.
Thus in order to achieve these goals, the government should start issuance of a
residential title which could work as the identification of the ownership of the land
and these should focus on those who live in the villages whose lands are not yet
surveyed.

There are citizens who believe that, those lands they live in (and own) are eligible
for applications of loans from the Microfinance institutions but, these institutions
have refused to accept residential licenses, sales agreements and letters of
offer.49Thus these people are not allowed to access loans against unregistered land,
but the problem here is why these Microfinance institutions refuse to accept
documents apart from a title deed as evidence to prove the ownership of land, while
resident licenses are undeniably issued by the government? This research seeks to
find out why it is so difficult to some of these microfinance institutions to accept
unsurveyed land as security despite provided by the laws.

MKWAWA, E.P50. The author describes the position and the extent to which
financial services in Tanzania have been integrated into poverty reduction strategies.
That Microfinance institutions have several branches but the majority of potential

49
Tanzania Property and Business Formalization Program, 2007 retrieved on 6 th December 2015
from World wide web https://www.google.com/search?q= Tanzania+Property+and+Business+
Formalization+Program%2C+ +2007&ie=utf-8&oe=utf-8&client=firefox-b-ab p.2
50
Mkwawa. E.P. (CEO Dar es Salaam community Bank Limited) Integrating Financial Services into
Poverty Reduction Strategies in Tanzania Rerieved 1st December 2016 World Wide Web
https://www.google.com/search?q=Mkwawa+E%2C+P+Chief+Executive+Officer+Dar+es+salaam
+community+Bank+Limited+Integrating+Financial+Services+Into+Poverty+Reduction+Strategies
+In+Tanzania.&ie=utf-8&oe=utf-8&client=firefox-b-ab P. 4

19
borrowers fail to utilize the services due to the fact that access to loans by the rural
communities are limited because of lack of preferred collateral.51

Efforts have been made by the Government to make sure that the people who live in
village land can attain loans just like those live in surveyed land, and to this effect
has issued a policy dubbed „MKURABITA, National Microfinance policy and has
set up a regulatory framework which will encourage microfinance institutions to
issue loans to persons who tender unsurveyed land as security for their loans
(mortgage).52 Unfortunately the microfinance institutions are still reluctant to issue
loans to people who live in village land who use the said land as collateral.

In this work the author discusses the aim of establishing these Microfinance
Institutions for the targeted groups. The author also takes trouble to explain the
efforts made by the Government. However some Financial institutions are still
reluctant to accept to grant loans to the applicants. So this research goes deeper
into the matter by looking the legal reasons which face this Microfinance to accept
unsurveyed land as security for loans which the author has not bother to consider in
his discussion.

OECD REPORT (2013)53. This Report describes the financial sector on its growth
that has occurred quickly over the last few years, it remains highly concentrated and
dominated by over-liquid banking institutions. 56% of the population, and in

51
Mkwawa. E.P. (CEO Dar es Salaam community Bank Limited) Integrating Financial Services into
st
Poverty Reduction Strategies in Tanzania Rerieved 1 December 2016 World Wide Web
https://www.google.com/search?q=Mkwawa+E%2C+P+Chief+Executive+Officer+Dar+es+salaam+
community+Bank+Limited+Integrating+Financial+Services+Into+Poverty+Reduction+Strategies+In
+Tanzania.&ie=utf-8&oe=utf-8&client=firefox-b-ab P. 3
52
Mkwawa. E.P. (CEO Dar es Salaam community Bank Limited) Integrating Financial Services into
st
Poverty Reduction Strategies in Tanzania Rerieved 1 December 2016 World Wide Web
https://www.google.com/search?q=Mkwawa+E%2C+P+Chief+Executive+Officer+Dar+es+salaam+
community+Bank+Limited+Integrating+Financial+Services+Into+Poverty+Reduction+Strategies+In
+Tanzania.&ie=utf-8&oe=utf-8&client=firefox-b-ab P. 9
53
OECD. (2013). OECD Investment Policy Reviews: Tanzania 2013: Overview of progress and
policy challenges in Tanzania. OECD Publishing. Retrieved on June , 2015 from World Web Wide
http://dx.doi.org/10.1787/9789264204348-6-en p 42

20
particular small businesses in rural areas, remain excluded from any financial
service. In 2011, only 8% of the rural population had access to formal financial
institutions (banks and insurance companies).

According to the Global Competitiveness Report 2013-14, access to financing is

cited as the most problematic factor for doing business in Tanzania, closely followed
by infrastructure (WEF, 2013). Credit from commercial banks has increased
significantly over the last five years but only 12% of this credit went to agriculture.
Only 8% of the domestic lending to agriculture went to agricultural production, with
the rest channeled to agricultural trading. Despite the considerable support given to
microfinance in recent years, the impact of microfinance on access to financial
services has been negligible54.

Microfinance institutions have been lending at higher interest rates than the
commercial banks, averaging 30%. Savings and Credit Cooperative Societies
(SACCOS) may have the greatest potential to expand credit supply to agriculture but
also they are reluctant to accept farms to use their lands as securities when they are
looking for advancing loans.55

While their number has been growing, it remains too limited to meet demand in rural
areas. Furthermore, they remain largely unregulated, resulting in high variations in
service quality and management practices. The lack of collateral represents a critical
issue to access both formal and semi-formal credit. Commercial banks require legal
collateral covering of the credit amount56.

This research looks on why some of these Microfinance institutions are reluctant to
accept the use of unsurveyed land as security for loans as evidenced in the report
54
OECD. (2013). OECD Investment Policy Reviews: Tanzania 2013: Overview of progress and
policy challenges in Tanzania. OECD Publishing. Retrieved on June , 2015 from World Web Wide
http://dx.doi.org/10.1787/9789264204348-6-en p 42
55
ibid
56
ibid

21
above. The number of the applicants who access loan services is still low, and
therefore the researcher in this research look for the reasons behind the reluctance of
some of these microfinance institutions which are reluctant despite the provisions of
the law to accept such security.

Romanus S, (2009).57. The National Land Policy recognizes the importance of land
in poverty reduction, that land registration enhances tenure security, increases access
to credit and finally stimulates agriculture investment. The Tanzania Government is
progressing with the implementation of the pro poor land titling project; the main
purpose is to enable the farmers to obtain loans from financial institutions. Because
most of the land is unsurveyed or village land, villagers who applies loan however
face banks which impose conditions that make the majority of farms fail to get loans.
Mortgage lending is by itself a business in some other countries lucrative and well
secured. The author adds that in Tanzania, few people secure loans to run their
business even if the prospects of the loan present a credible outcome to the business
loan or borrowing for investment purposes. It is widely held in financial institution
circles that Tanzanians have a culture of defaulting therefore banks and lenders
cannot rely on information provided by the mortgage applicants and therefore
lenders require collateral securities, and actually for the case of real estate financing
the most preferred collateral is land with a title deed.58

The author has explained how inefficiency of land sector regarding land
development provision of occupancy hinders mortgage financing, from this point of
author‟s view researchers goes further and looking the issues and legal challenges
facing Microfinance institutions when consider credit facilities to be secured by

57
Romanus S. (2009).Assessing the impact of Customary Land Rights Registration on credit
accessibly farmers in Tanzania. Retrieved on 13 th October 2015, from World Web Wide
https://www.google.com/search?q=Romanus+S%2C+%282009%29.+Assessing+the+impact+of+C
ustomary+Land+Rights+Registration+on+credit+accessibly+farmers+in+Tanzania.&ie=utf-
8&oe=utf-8&client=firefox-b pp1-8
58
ibid

22
unsurveyed land in order to come up with proper and desirous way of financing
people who own unsurveyed land.
Tanganyika Law society (June 2015)59In this context the authors focus on the use of
land stating that-
Rehani ni dhamana ya mkopo kwa kutumia ardhi kama kitu cha
usalama kwa mkopeshaji wa mkopo. Mmiliki wa ardhi huweza
kuomba mkopo katika taasisi za kifedha kama vile benki kwa kuweka
hati ya miliki ya ardhi yake kama dhamana ya mkopo aliochukua.
Rehani Katika Ardhi Tanzania ni nchi iliyo kwenye mikakati ya
maendeleo endelevu. Maendeleo endelevu hutoka katika vyanzo
mbalimbali ikiwemo maliasili Kama ardhi.Taasisi za kifedha pia
zinachangia katika maendeleo kwa njia ya kuwapatia wananchi
mkopo wa fedha kwa riba. Kutokana Na nia ya kuhakikisha uwepo
Wa maendeleo, Serikali ilionelea Ni vyema kurekebisha baadhi ya
vipengele katika Sheria za Ardhi, 1999 na Sheria ya Usajili wa Ardhi
(Sura 334) kupitia kutungwa kwa Sheria ya Rehani. Sheria ya Rehani
inatumika kuongoza taasisi za fedha katika kukopesha fedha kwa
wananchi.

The authors look on several reforms in financial institutions through changes

which were enacted in the laws regulating the loan system in the country, which
allowed creation of the loans on both surveyed land and unsurveyed land .That land
can be used as securities for loans, land is given as a gate to be forfeited in default,
because land is a security which can be stable, for a long period and be readily
realizable in all conditions with a simple title which is transferable without undue
trouble.

The authors provides the aim of land that land can be used as security for loans
regardless the kind of land and the author in their work they father state that the
several reforms was made including the amendment of Land Act and Village Land
Act in order to enable citizens to use land as security but in their work they had
never spoken on how the applicant can use unsurveyed land as security and the legal

59
Tanganyika Law society (June 2015).Ijue Sheria Ya Ardhi n a Taratibu Zinazohusika Kupata,
Kumiliki Na Kuuza Ardhi Vijijini Na Mjini p. 20

23
challenges that facing these Microfinance Institution when they accept such kind as
security for loans .

Hence researchers are interested to go further and look why some of microfinance
institutions are reluctant to accept unsurveyed land as security for loans .

1.6 Research Methodology

This part covers the methodological aspects applied in conduct research. This are
covered sampling, and the methods to be employed in data collection analyzing it
and presenting the findings.

1.6.1 Research Design

The study uses the Descriptive design because this method helped the research to
collect data on the Access to Loans in Microfinance Institutions by use Unsurveyed
Land as Security. The research prepared questionnaire and interviewing loans
officers from Microfinance institutions selected, lawyers from different firms who
are expert on mortgage issues, lecturers from different institutions and lastly to the
Tanzania Association of Microfinance Institutions (TAMFI.60

1.6.2 Area of study

The researcher collected data mainly in Dar es Salaam, Mwanza, and Tarime –Mara.
The researcher decided to select these places due to the fact that the Microfinance
institutions within these places are facing such issues including land disputes.

1.6.3 Unity of inquiry /Sampling size

In collecting primary data the researcher used random sampling. That being the case
the researcher aimed to consulting Forty (40 ) respondents but was able to meet
thirty (30) respondents comprising of loan officers working at different

60
Kothari, C.R (1999). Research Methodology: Methods & Techniques, 2nd Ed; New Delhi: New
Age International (P) Limited Publisher, p 39.

24
Microfinance Institutions, lawyers from different firms who are expert on mortgage
issues, lecturers from different institutions and lastly the Tanzania Association of
Microfinance Institutions (TAMFI).

1.6.4 Sample design

The researcher use both probability and non probability sampling. This method
helped to obtain data from representatives of these different groups including loan
officers working at different Microfinance Institutions, lawyers from different firms
who are expert on mortgage issues, lecturers from different institutions and lastly the
Tanzania Association of Microfinance Institutions (TAMFI). Again the researcher
also selected sample respondents who were easy to access during the data collection.
The reason for the choice of this sample design is due to the nature of the study area.
The area is very busy such that is difficult to access the earlier specified respondent.
So in order to facilitate the exercise of data collection, the same would be
interviewed by the guide questionnaire.

1.6.4 Methods of data Collection.

The researcher also used both primary data and secondary data to collect data
whereby in Primary data the researcher use interview and questionnaire, and in
secondary data collection the researcher based on literature review, case laws, and
reports and from different sources include library, internet source and report.

1.6.4.1 Primary data

This is first hand data which the researcher used directly from the field .The
researcher employed interviews and Questionnaires.

i. Interview
The researcher used both structured and unstructured interviews in order to collect
data from respondents. The researcher was able to interview respondents from
Tarime, Mwanza and Dar es Salaam .The researcher managed to interview loan

25
officers working at different Microfinance Institutions, lawyers from different firms
who are expert on mortgage issues, lecturers from different institutions and lastly the
Tanzania Association of Microfinance Institutions (TAMFI).

Structured interview was conducted to seek specific information while unstructured

interview was also preferred because they allowed a greater flexibility in the
questioning process and therefore the researcher was able to get the concrete and
relevant information which in turn helped him in getting good and fruitful results.

ii. Questionnaire
The researcher prepared questions both open-ended and closed-ended questionnaires
used and supplied to the respondents. The researcher able to distribute questionnaire
to ten(10) loan officers and email two lawyers who are experts in these areas.
This was an advantageous method because respondents had adequate time to answer
and also method was used for those respondents who could not be easily reached.

1.6.4.2 Secondary Data

The researcher based on literature review, case laws, and reports from different
sources include library, internet source and news papers.

1.6.5 Data Analysis

This involves examining and analyzing data which have been collected from field
research by making deductions and inferences. As far as this research is concerned,
qualitative methodology was employed to analyze data collected from field research.
This is normally a method of data analysis examining the data acquired in terms of
quality and variety. Thus such method was used by this researcher to make clarity of
some points in this report.

26
1.6.6 Scope of Study
The study is limited to examine on Access to Loans in Microfinance Institutions by
use Unsurveyed Land as Security in Tanzania Main Land. The financial institutions
selected to represent others are TAMFI, Tujijenge ,UTT,NMB, FINCA, Access
Bank, Sacco‟s since these Financial institutions are among the top financial
institutions dealing much with the provision of secured loans to small businessmen
in Tanzania Mainland .

1.7 Chapterization
This Research comprises five chapters; the first chapter is the introductory chapter,
which includes all the parts in the research proposal. The second chapter discusses
the conceptual framework for the research, assumptions, expectations and theories
that supports the topic at hand. The third chapter analyses the legal implication on
the creation of mortgage. Fourth chapter deals with the analysis of the data collected
from different sources. The collected data analysed and interpreted in this chapter.
Finally in chapter five are included Conclusion and Recommendations of the study.

27
 CHAPTER TWO
CONCEPTUAL FRAMEWORK ON MORTGAGE CREATION ON
UNSURVEYED LAND

2.0 Introduction
This chapter gives out the conceptual framework on mortgage creation on un
surveyed Land. The main focus in this chapter is the trend of granting loans under
the current laws in Tanzania. There have constantly been great reforms in the laws
and amendments before having the current laws in Tanzania. These reforms have led
to the new laws and policies especially on how to grant loans on surveyed land and
unsurveyed land as well as on the qualities of a good mortgage in Tanzania.

2.1 Mortgage
The term „mortgage‟ is not easy to delineate, neither is it easily comprehensible.
However, it has been defined as a conveyance of land or assignment of chattels as
security for the payment of a debt or the discharge of some other obligation for
which it is given. Mortgage has been defined as the most important form of security.
It‟s essential nature is that it is a conveyance of a legal or equitable interest in
property with provision for redemption.61

On the other hand the concept of „mortgage‟ has been explained as a legal
agreement that conveys the conditional right of ownership on an asset or property
by its owner(the mortgagor) to the lender (the mortgagee) as security for a loan .62
Additional mortgage is the transfer of an interest in the specific immovable property
of securing the payment of money advanced or to be advanced by way of loan, an
existing or future debt or the performance of an engagement which may give rise to
a pecuniary liability.

61
Violet, A (2011). land law : Published by National Open University of Nigeria P 131
62
Http://Legal-dictionary.the freedictionary.com/mortgage Retrieved on 15/5/2016

28
The term „mortgage‟ may simply be understood to mean a conveyance of interest in
property which designed to secure payment of money of discharge some other
obligations63

Mortgagor is referred to the borrower who grants a mortgage over freehold or

leasehold land belong tom him. The bank, as the lender, who has the benefit of
mortgage is known as the “mortgagee”64

General the concept mortgage have been explained by different authors but the key
concept the concept mean that a loan where the borrower place a property as
security for his loan and most preferred is land that a borrower default to pay back
the financial institution may exercise remedies provided in the law including sell
and others.

2.2 History of mortgage

Tanzania is amongst countries in the world which adopted the „common law system‟
and the legal history of mortgage in Tanzania was mainly influenced by the early
English position. The country also adapted those former English laws and
conveyance practices which were in force in England. For example the property laws
of Tanzania Cap 114on mortgages applicable currently are those which were in force
in England in 1922. Remarkably is the application of the conveyance and law of
property Act.65 This is due the fact that Tanzania is amongst the countries in the
world which adopted the common law system. Prior to the law of property in

63
Rwegasira A. (2012). Land as a Human Right: Mkuki na Nyota ,Dar es Salaam p .181
64
Mark, H. (2011).Banking law :Published by Lexis Nexis P 337
65
Mwaisondola, G.N(2007).The modern law of mortgage in Tanzania ,the role of
Land Act,1999:School of Law the University of Birmingham. Retrieved on 2nd
March 2016 from World wide web
https://www.google.com/search?q=Mwaisondola%2C+G.N%282007%29.The+mod
ern+law+of+mortgage+in+Tanzania+%2Cthe+role+of+Land+Act%2C1999%3AS
chool+of+Law++the+University+of+Birmingham.+&ie=utf-8&oe=utf-
8&client=firefox-b.p 108

29
Tanzania66 the repealed Land Ordinance67 made applicable among other laws
relating to real and personal property.
Conversely, the imperative guide on the law and practice of mortgage in Tanzania is
due the past Law of Property Act of 1925. Eventually the position was also referred
to the Law of Property Act in application along with recent common law and
mortgage principle rightly provided in the Tanzania.

2.2.1. Current Practice of Granting Loans in Tanzania

The Government of Tanzania has made several changes to make sure that they assist
low income gain citizens to access financial assistance from financial institutions.
Among those changes and efforts have led to amendments of laws which they
believe could be sufficient to achieve those goals. The changes were enacted for the
purpose of protecting the interest of the user and occupier of the landed properties.

68
The Land Act and Village Land Act69 were the main laws enacted; the said
enactments allow creation of mortgage in the land (village land and surveyed land).
Accordingly the aforesaid legislative revolution brought changes which were not
there before the enactment of the same. The current situation is that a borrower can
be granted loan by warranting his or her unsurveyed land as security, also procedures
to be followed before granting loans are differently curbed as well as matters relating
to matrimonial consents.70

The enactment of land laws in Tanzania brought changes in respect to use and
ownership. Land under the new regime is used as security for mortgages and as well
charges constitute the use of land as security. Also land can be used as lien or pledge
for a loan of money.71 The basis of use of land as security is to the effect that land is

66
The Law of Property Act of 1925
67
Ordinance No. 5 of 1999
68
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
69
The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
70
S.114 of The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
71
Onalo, P.L(n.d) Land law and Conveyancing in Kenya: Law Africa Publishing (Kenya) Ltd.p 127.

30
used as a gauge to be forfeited in default of payment. Eventually the rationale behind
the enacted land law is to effect protection to the interest of the user and occupier of
land.
Principally land stands as the locomotion of commercial and financial transactions. It
takes on sophisticated economy. Development of the human community can be
revealed from its traditional use of land for subsistence economy, cash economy and
then to use land as security.

With the use of land as security, the land transaction transcends the use of land for
only subsistence and simple cash economy. Land takes on a sophisticated aspect. It
in fact behaves as a chattel.72

2.2.2 Creation of mortgage

A mortgage is created by execution of a titl deed or customary deed which must be
executed in accordance with the law73. If mortgage deeds over land created between
a company and another company must be sealed by the company in the presence of
two directors or one director and the company, if the mortgage deed over land is
executed by an individual it must be signed by that individual, it must be signed by
that individual before the notary public. There are prescribed forms for execution by
and by companies and individual in land related security interests. 74 The mortgage
deeds executed by companies which do not involve land are not required to be sealed
though most authority demands sealing.

2.2.3 Types of Mortgage

There are different types of mortgages, but the main issue is such that, the kind of
mortgage should be in accordance with the laws governing the said mortgage, if
parties contravene the required elements then that mortgage shall be null and void,
72
Onalo, P.L(n.d) Land law and Conveyancing in Kenya: Law Africa Publishing (Kenya) Ltd.p 127.
73
Tenga W, Sist, J (2015)Theoretical Foundations of Land Law in Tanzania: Law Africa Publishing
(T) Ltd, Dar-es-Salaam P. 287
74
Legal Mortgage in Tanzania retrieved from
http//www.castles.com/general.php?category=syndicates on 12/December 2015

31
for example they are kind of mortgage where borrower can use movable property as
security and there is a limit amount of money that can be issued to him, that some of
financial institutions may agree to construct house (house mortgage) to their
customers as loans. Therefore the following are types of mortgage as explained
hereunder.

2.2.3.1 Legal Mortgage

This is among of the types of mortgage where recognized by the laws applicable. It
created by execution of a deed(deed of transfer). The mortgagor binds himself to
repay the mortgage money on a certain date and transfers the mortgage property
absolutely to the mortgagee subject that the mortgagee will transfer it to him on
repayment of the mortgage money.

The mortgagor has the right to redeem his property not only in the absence of default
but also on default provided he can pay up the amount due before his right is
debarred. This right is known as the equity of redemption also known as right of
redemption. It exists as soon as a mortgage is created. The borrower keeps the
mortgaged land with the mortgagee subject to redemption upon payment. Equity of
redemption is a mortgagor‟s right of ownership of the property subject to the
mortgage and is an interest in land which can be granted, devised or otherwise75.

2.2.3.2 Legal mortgage under registered land

If there is no entry on register limiting his ability to make such a disposition ,the
registered proprieter, or a person entitled to be registerd as a proprietor, of an estate
in land has power to create acharge by way of legal mortgage .
The charge must be excuted as a deed. Normal this are mortgage which are created
on the land which are surveyed or registered .76

75
Legal Mortgage in Tanzania Retrieved from World Web Wide
http//www.castles.com/general.php?category=syndicates on 12/December 2015
76
Mark ,H. (2011).Banking law :Published by Lexis Nexis P 339

32
2.2.3.3 Legal Mortgage and charge of unsurveyed land
A mortgage of unsurveyed land can be created by customary deed, either granting a
long term of years or as a charge by the way of legal mortgage, and in either case
the mortgageee is entitled to possession of the documents of title to the land, as if it
had actually been conveyed to him.

As can be concluded, the creation of a legal mortgage over unsurveyed land is a

way of assisting those who own unsurveyed land , and which is to be effected by
depositing a document of title. In the case of an applicant who own unsurveyed
land use is made of residential licenses, sales agreements and other documents as
evidence of ownership of property since their land is not surveyed but they do own
other document apart from a formal land title. However despite the clear statutory
endorsement some of microfinance institutions are reluctant to accept those
documents as evidence of ownership of unsurveyed plots of land.

2.2.3.4 Simple Mortgage

This is the type of mortgage where by there is no delivery of possession but the
mortgagor binds himself to personally pay the mortgage money and agrees that the
mortgaged property will be sold upon his default and the proceeds thereof applied
towards discharging the mortgage debt.77

That simple mortgage without delivering possession of the mortgaged property,the

mortgagor binds himself personally to pay the mortgage-money, and agrees
,expressly or impliedly ,that in the event of failing to pay according to his
contract,the mortgagee shall have a right to cause the mortgaged property to be sold
and all the required proceds of sale the property shall be followed or applied, so far
as may be necessary, in payment of mortgaged money .

77
Tom, O. (2008). Conveyancing Principle& Practice, Publish Law Africa Publishing (T) Ltd,
Nairobi: P. 166

33
Therefore the whole transaction from begining up to the end is called simple
mortgage because does not include alot of procedures as other, its simple to acces
loans.78

2.2.3.5 Legal charge

This does not convey the estate. It simply intends to charge the land for the
repayment of the loan advanced. It can be either legal or equitable charge79

2.2.3.6 Equitable mortgage

An equitable mortgage is created by delivering to the lender of the document of the
title relating to the borrowers land provided there is intention to treat the land as
security80. Initially at common law there was no need for writing, the deposit of the
title deeds could suffice81 due to necessity of first, proving intention it became
necessary to make the borrower sign some memorandum to the effect that the
document of the title were deposit to create security by way of equitable mortgage,
otherwise the deposit of the document could bring about the intention , second, the
borrower had deposited the document of title with the view to create an equitable
right one the land by security without transfer of the legal estate and lastly, the
borrower had deposited the document of title as an act of the part performance
consisted of an agreement to execute the legal mortgage.

2.2.3.7 Informal mortgage

Mortgage can be created in different ways be it formal or informal whereby informal
is among the types of mortgage whereby they lack formality, casual, not drafted or
executed in manner that complies with accepted legal form but this kind of
mortgage is provided under the Land Act whereby most of Microfinance prefer to

78
Tom, O. (2008). Conveyancing Principle& Practice, Publish Law Africa Publishing (T) Ltd,
Nairobi: P. 166
79
ibid
80
P. L (n.d) Land law and Conveyancing in Kenya: Law Africa Publishing (Kenya) Ltd.p 131.
81
Tenga W, Sist, J. (2008), Manual on Land and Conveyancing in Tanzania :Law Africa
Publishing(T) ltd, Dar-es-Salaam P 256

34
use in order to issue loans for applicants, For example NMB prepares certain forms
which are used by those who asking loans but they did not meet requirements of
other types of mortgage. This form can be due to the kind of collaterals they have or
other things. Whereby the Land Act provides that, a borrower can access loans from
a financial institution upon written agreement and witnesses by parties82.

Therefore, the above explained are among the types of mortgage where a borrower
can choose on which type he or she can be able to fulfill its requirements, in this case
each type of mortgage has its own requirements in order to access it, for example
others don‟t accept un surveyed land as security especially commercial banks like
Barclays‟ PLC, and Standard Charter, while another only dealing with those who
had registered collateral and big companies loans.

2.3 Qualities of good mortgage in Tanzania

Land is the most preferred object among security assets in mortgage transactions in
spite of the availability of other property which can also be accepted as collateral.
The land that is suitable to have been treated as security includes village land and
surveyed land in Tanzania. Mortgage therefore is another form of disposition that
affects land. All the regulations that pertains to dispositions is definitely applicable
to mortgage accordingly.83

It is worth to consider generally that, paying back the sum advanced or an assurance
as to do so is indeed a necessary lending requirement. In order to ensure such a
repayment, lenders do ensure that the sum advanced is secured by some form of
securities. Such securities include a pledge, pawn, charge, lien, mortgage,
hypothecation, debenture and other Security guarantees the safety of the advance,
suitability of the purpose of the advance and profitability of the project.84

82
Goo S.H (2002) Land Law (3rd Edition); Publishing Hong Kong. P .820.
83
Tenga W Sist ,J.(2008).Manual on Land and Conveyancing in Tanzania :Law Africa Publishing(T)
ltd, Dar-es-Salaam P 256
84
Ibid.

35
Hence any good security must have the following attributes:-
i. Its value must be reasonable and stable over the years.
ii. A good security should be realizable in all conditions with a simple title which
is transferable without undue incumbrances.
iii. Must be easy for the financial Institutions to obtain a safe and unquestionable
title.
iv. Must be free from liabilities to third parties.85

Therefore, whenever a Microfinance advances money to its clients, it has to take

property as security and they prefer Land as good security so as to reduce and/or
prevent a total loss of funds and revenue in case the borrower defaults. Thus,
collateral offered serves as a protection to the financial institution. Generally,
security accepted by financial institutions includes land. Traditionally, financial
institutions preferred the use of land property as security for their loans, though they
prefer mortgage which have above qualities.

3.4 Purposes of mortgage

According to the law on mortgage in Tanzania and at common law, mortgage has the
effect of security only. Security for loan means the acquisition of right over property
to support a borrower‟s personal undertaking to repay a loan, property which can be
exercised should the borrower default. This come in consideration that, the lender is
not sure if the borrower will pay the money back, so he asks for a property as a
security.

Under the provisions of section 112(1) of the Land Act the mortgage is created by
the mortgagor to secure loan, that means a mortgage transaction is intended for a
security only and not a transaction for transfer of title to land.

85
Tenga W .Sist ,J.(2008).Manual on Land and Conveyancing in Tanzania ,Law Africa Publishing(T)
ltd: Dar-es-Salaam P 256

36
Again section 115(1) clearly provides that; a mortgage transaction shall have effect
of a security only and shall not operate as a transfer of any interest on the right in
land from borrower to the lender. This provision implies the availability of
borrower‟s right to redeem his property.

If the transaction is entered without the right of redemption, then that could be a
transaction for transfer of land and not a mortgage. In other words, the expression
that “Once a mortgage always a mortgage” implies that once it is established or
proved to be a mortgage it is therefore redeemable notwithstanding agreement to the
contrary. An agreement given to the mortgage to purchase the property is void86.
In this respect, the mortgagor is entitled to redeem his/her property regardless of the
expiry of due date. However, this does not mean that the mortgagee has no remedy
at all if the mortgagor defaults.

2.5 Securities
The word “security” means an interest which the debtor confers on the creditor in an
item of property owned by himself or, by arrangement in the property of some third
party such as a surety. The arrangement in the property of the third party may be in
the form of a guarantee or an indemnity. Guarantees and indemnities are
arrangements in which a third party, the surety, agrees to assume liability if the
debtor defaults or causes loss to the creditor.
Security is a term which, in banking law means the acquisition of
rights over property taken to support the borrowers undertaking to
repay which can be exercised if the borrower does not87.

Security is insurance against foreseen and unforeseeable circumstances. The banker

with security acquires some rights over and above the basic contractual right to sue
the customer if repayment is not made.

86
Howard v. Harris (1683)1 Vern 33
87
Alphonce M.A.U and Janeth F.A.U (2011). Aspect of Banking and Microfinance law: 1st Edition
p. 44

37
We have different kinds of securities which a banker or that Microfinance
Institutions may accept as securities, it only depends on their respective policies. For
example some of the financial institutions like Finca or Pride do accept household
assets like television, tables to be used as security but other like NMB (National
Microfinance) prefers land as security, and so differ from others lenders.

Therefore it depends on the policy of the financial institution but the only preferred
by many financial institutions is land since land has a stable value, apart from other
securities.

2.6 Land as securities

Land is treated as security when it is warranted in terms of mortgage and charges.
Furthermore land can be used as a lien or pledge for a loan of money. The land is
given as pledge to be forfeited in default of payment. This is the basis of the use of
land as security, and in this capacity land is at the very heart of commercial and
financial transaction. It takes on a sophisticated economy.88

In law, land can be used as mortgage or charge. A pledge occurs when the lender
advances money to the borrower who in turn delivers to the lender the possession of
goods .Under the same pledge; the lender has power of sale if the borrower defaults
in repayment. This occurs notwithstanding that the borrower at the time of default
the ownership as a right is subrogate to the lender; under a lien there is no right to
sale.

88
Onalo, P.L(n.d) Land law and Conveyancing in Kenya: Law Africa Publishing (Kenya) Ltd P 127.

38
Most of financial institutions prefer to use land as securities for mortgage. Basing on
the finance sector reforms 2000,89 financial institutions prefer the use of surveyed
land than village land (unsurveyed land) as securities for mortgage.

2.6.1 Mortgagee’s right of enforcing his security

There are some conditions precedent to the exercise of the mortgagee‟s right to sell.
First there must be breach of covenant on the mortgaged deed. The mortgager must
have breached the covenant as per section 127 of Land (Amendment) Act.

Secondly, the mortgagee must give notice of not less than 30 days to the defaulting
mortgagor. In the case of NBC v. Walter T Czun90 the mortgagee sold the mortgaged
property. It was held that the sale of the mortgaged property was illegal. Since
Mortgagee failure to delivery notice of sale property.

Thirdly, there must not be any outstanding query or any un discharged obligation.
This means that the mortgagor might be claiming that he has already discharged his
obligation or part of it. Therefore the mortgagee must make sure that there is no
query in order to justify the sale of mortgaged property.

Fourthly, the mortgagee is duty bound to exercise care in the sale exercise of the
mortgaged property. The mortgagee should obtain the best price obtainable at the
time of the sale. The right is taken to be breached by the mortgagee if by looking at
the value the court forms opinion that it is below the average price91. Evaluation of
that property should be made. In Iabela Industries Ltd, Gulabila Cheyo and another
v. Tanzania Investment Bank92; the house property of the mortgagor claimed that the

89
See item 2.2 National Microfinance Policy, Ministry of Finance, United Republic of Tanzania, May
2000 p 8
90
Nbc v. Walter T Czun ,Civil Appeal No. 31 of 1995 ,Court of Tanzania at Dar es
salaam(Unreported)
91
Nbc v. Walter T Czun ,Civil Appeal No. 31 of 1995 ,Court of Tanzania at Dar es
salaam(Unreported)
92
Iabela Industries Ltd, Gulabila Cheyo and another v. Tanzania Investment Bank ,Appeal No. 27of
2002,Court of Appeal of Tanzania at Dar es salaam (unreported)

39
sale of the mortgaged house by the auction mart was 25% below the average price.
The court held that the mortgagor has failed to prove that his house has more value
than the price sold.

Another right of the mortgagee is taking possession of the mortgaged land. This is a
non financial remedy and it is exercised by the mortgagee subject to a number of
restrictions as provided under section 130(5) of Land Act which provides that; a
mortgagee shall not otherwise than through the execution of an order of the Court
enter into or seek to enter into possession by taking physical possession land.

2.6.2 Right to redeem

This is the right reserved with the mortgagor to pay back the loan to the mortgagee,
it comes from the maxim that „once a mortgage always a mortgage‟. It was the
holding in the case of, Selton v. Slade93that the reason why the mortgagor obtained
the loan was that the mortgagee accepted the land to use it as security for the loan
granted. Therefore this kind of relationship will result in a situation where neither the
mortgagee nor the mortgagor is in a disadvantage inferior position to recover what
belongs to him.

2.6.2.1The equity of redemption

„Equity of redemption‟ is defined as the mortgagor‟s right of ownership of the
property subject to the mortgage and is an interest in land which can be granted,
devised or entail. This means the right to redeem that the mortgagor bears or carries
once he secures the loan from the mortgagee. In other words the mortgagor becomes
the holder of an equitable interest in the land as it was held in the case of Casborne
v. Scarfe94 . Normally this equitable interest starts as soon as the agreement between
the mortgagor and the mortgagee has been concluded. If the mortgagor dies this
passes to anyone who is interested in the equity of redemption.

93
Selton v. Slade (1802) 7 VES 265 AT 273.
94
Casborne v. Scarfe (17371) 1 ALK 603

40
Another term is the equitable right to redeem; this is what came with the maxim
„once a mortgage always a mortgage.‟ it gives the mortgagor the right to at least to
delay repaying the loan regardless of who had been expressly agreed between the
two. The rationale of this is the fact that the property mortgage was merely a
security for the money lent and that it was unjust that the mortgagor should lose his
property merely because he was late in repaying the loan.

However the late payment will not leave the mortgagor without remedy against the
mortgagee for example to leave the loan outstanding and continue to receive interest
on it form mortgagor. The remedies will be there, this only protect the mortgagor
from losing his property for late payment.

2.7 Remedies available when borrowers default

That, the main objective of mortgage is to provide security for a loan therefore if
mortgagor fail to pay back loan mortgagee, like any other lender, can always take
matter to the court for default of mortgagor to pay back loans as one of the step but
this may be long process in which enforcement of judgment is obtained can be
difficult. Therefore the mortgagee institution, therefore has developed several
remedies for mortgage including the right to use mortgaged, charged land to repay
loan, often without the need for any court proceeding.

These remedies they are different in way of exercise them, it depend with types of
mortgage and types of land which borrower has put as security as explained down
here under the law.

S.115 (2) of the Land Act95provides

S. 115 (2) Where the mortgagee under a customary mortgage seeks to
exercise any customary remedy which involves or may involve the
mortgagor being disposed or permanently deprived of the occupation of
the mortgaged land, the mortgagee shall, after using the services of the

95
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004

41
 Village Land Council, try and mediate on the application of the
proposed or any other remedy, make an application to the Village Land
Council for an order authorizing the exercise of that remedy”

Law is clear for a banker or any financial institution before seek any remedy
including those remedy after the mortgagor default to pay back loans the law require
them to seek Village Land Council and to try to mediate before exorcise any
remedy.

Addition exercise of remedy from the mortgagor under customary right of

occupancy you should follow the requirement of above law is different under
granted right of occupancy.

2.8 Discharge of Mortgage

According to section 121 (1) and (2) of the Land Act96, upon payment of all moneys
and the performance of all other conditions and obligations secured by mortgage, the
mortgagee shall at the request and costs of mortgagor discharge the mortgage
instrument. Furthermore some section provide upon any agreement or provision in
the mortgage instrument or otherwise which requires that a mortgagor wishing to
obtain a discharge of the mortgage under the subsection (1) shall be required to
pay to the mortgagee, as well as paying all other monies secured by the mortgage,
additional amount in excess of month‟s interest at the rate at which interest is
payable on the principal sum secured by mortgage shall be void.

After borrowers acquire loans from this Microfinance and upon payment of all
moneys and performance of all other conditions and obligations in the mortgage, the
mortgage must be discharged from liability.97 The discharge is made at the instance

96
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
97
See for No. 44 of GN. No. 71 of 2001.

42
of the mortgagor requesting such a discharge at any time 98 should the mortgage
contained provisions which:-
Purport to deprive the mortgagor of his right of redemption or seek to fetter the
exercise of the right to redeem or provide for any collateral advantage which is
unfair and unconscionable and inconsistent with the right to discharge, the mortgage
is deemed to be void99.

It is only when there is default, that the lender can exercise the stated remedies.
Before exercising such remedies the lender must comply with certain requirements,
that is to say, sending a notice of not less than thirty days default, a statement of the
amount to be paid to rectify the default ( in case of non-payment, of not less than
three months arrears), if it is a covenant the need to rectify it within two months, and
an indication of his intention to exercise the remedies. Where the Minister has
prescribed the form and content of a notice, failure to comply with such a format will
make the notice void100

2.9Advantage of taking land as security

Land is among the preferred security forms for these financial institutions regardless
the nature of land, in this case can be surveyed or unsurveyed due to the provisions
of the law.

Therefore the advantage of taking land as security is that;

That land never completely loses its value101
In this case land is among the good security medium since the day to day value of
land tends to increase and not to decrease due to needs of people and it is for this
reason that financial institutions normally prefer land because it is the kind of
security which they can transfer easily. Moreover as the market value of such

98
S. 121 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
99
S .68and 71 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004
100
See form No 54 A of GN. No. 71 of 2001
101
Alphonce, M.A.U, Janeth, F.U. (2011) .Aspects of Banking and Microfinance Law :(1St Ed) p 51.

43
property is stable, they can sell and return back their money on time in case of
default of the borrower to pay back loans.

The second advantage of the use land as security for these Microfinance is that-
Land has historically been appreciating in terms of value102
In this regard land is different from other forms of security, in that whereas other
security forms can change their value due to the current situation and so can
unpredictably rise and fall, the history proves that the value of land is reliable since it
is a kind of security which always rises up, in sharp contrast with other forms of
security.

This explains why most of the micro-financial institutions and other financial lenders
they do prefer land as security for their loans since the market is stable as compared
with other forms of security and because landed assets are subject to wild
fluctuations in their market value, it is easy to transfer land.

The prime object of the Microfinance Policy was to establish Microfinance or banks
which will help the majority of citizens to get opportunities to raise their economic
status. The microfinance entities include saving, credit, payment facilities which are
provide under the National Microfinance Policy of 2000103.

2.9.1 Unsurveyed Land as security

Most of lender they prefer to receive Land as security despite of opportunity of
taking other kind of properties may be used as collateral .Among of the Land
recognizes by the Laws to be accepted as security is unsurveyed Land (unregistered
Land) in this since the main aim of the Government is to make sure they improve the
life standards of their citizens especially to assist them to access loans from
financial institutions in order to develop or improve their business .Majority of this

102
Alphonce, M.A.U, Janeth, F.U. (2011) .Aspects of Banking and Microfinance Law :(1St Ed) p 51.
103
National Microfinance Policy, item 2.2 Ministry of Finance: United Republic of Tanzania, May
2000 P 8

44
low income gain they own unsurveyed Land they are ones who targeted by
Government to get assistance , therefore due to this The government accept
104
unsurveyed Land to be among of the security for loans .

2.9.2 Advantage of unsurveyed Land as security

Since the Law recognize unsurveyed Land as security for loans has its advantages
to both Mortgagee and Mortgagor in the following grounds ,That it easy for
applicant since he or she use what he posses to help him to ask loans from Financial
institutions , rather than starting to look for other property as security. It‟s easy to
own unsurveyed Land other than surveyed Land.

2.9.3Disadvantages of unsurveyed land as security

In this context, unsurveyed land as one of the types of security found under the types
of immovable security has its advantages and also disadvantages, regarding its status
as follows.

Land is not an easily realizable security it is not slow moving security105

Under this context land as immovable security is not easy or simple as other to
realize. As security for example it needs a documents to show the right ownership,
but not only title deed, a banker should make an estimate value of the land apart
from other security like movable (motor vehicle) and other where it‟s easy to
recognize the value.

Land is at times difficult to value.106

In case the value of unsurveyed land as security depends on its location it may
change from time to time. Therefore a banker before accepting unsurveyed land as
security is required to find its value in order to decide whether the estimated value is
reasonable for the property being mortgaged.

104
Alphonce, M.A.U, Janeth, F.U. (2011) .Aspects of Banking and Microfinance Law :(1St Ed) p 51
105
ibid
106
ibid

45
If a mortgage is taken by deed, the equitable mortgagee must seek the court‟s
sanction in any action for realization of the security. In case of equitable mortgage
which a banker wants to exercise as security they must seek court sanctions since
this kind of security is and the right on the property not like legal where deed is
taken. Therefore important fact is that the interest acquired by a creditor must confer
on him a right to satisfy the debt out of the proceeds of the property in question.

The Government of the United Republic of Tanzania has made different efforts in
order to help its people, whereby it has introduced different policies in order to assist
economic growth of their people by introducing Microfinance Policy,
MKURABITA; for the purpose of these policies is to enable the Microfinance to
grant loans to the people living on village land where the only securities they have is
village land107.

Therefore, financial institutions prefer the use of land as securities since the value of
land normally increases day to day. They prefer to accept securities which have the
above qualities, but since the establishments of the Microfinance for purpose small
business persons who live in villages, their only securities consist of unsurveyed
land.

2.10 Microfinance (microfinance Institution)

Different authors not only provide the meaning and origin of the term „microfinance‟
in Tanzania ,but also on how microfinance institutions are connected to
unsurveyed land :
Microfinance refers to;
An array of financial services, including loans, savings and
insurance, available to poor entrepreneurs and small business
owners who have no collateral and wouldn't otherwise qualify for a
standard bank loan108

107
Alphonce, M.A.U, Janeth, F.U. (2011) .Aspects of Banking and Microfinance Law :(1St Ed) p 51
108
http://www.businessnewsdaily.com/4286-microfinance Retrieved on 2/2/2016.

46
Most often, micro-loans are given to those living in still-developing countries who
are working in a variety of different trades, including carpentry, fishing, farmer and
other low income gains.

Microfinance (microfinance institution) means:-

a bank or financial institution which is licensed by the Bank to
undertake banking business mainly with individuals, groups and
micro and small enterprises in the rural or urban areas.109

A microfinance institution: is an organization that offers financial services to the low

income segment of the population in a given country.
In Tanzania Micro-finance institutions (MFIs) offer loans and other financial
services for micro and small enterprise development and their loan conditions are not
as stringent as those given by the commercial banks. In this regard, they are better
placed to serve informal sector operators. And like in many developing countries, the
micro-finance industry in Tanzania is still young. For instance NGOs and SACCOs
(Savings and Credit Cooperative Organizations) in 1995 had grown stringently and
continued to grow with the increased success of Microfinance internationally110

A microfinance institution is still a relatively new concept in Tanzania. Beginning in

1995, it was mainly linked to women and poverty alleviation. The government tried
to convince commercial banks to support small and medium businesses. Once the
National Microfinance Policy was implemented in 2001, microfinance was officially
recognized as a tool for poverty eradication and with its increased use and exposure
to the country; banks have taken an interest in offering microfinance. 111

The National Microfinance is an institutional provider of microfinance services, and

the AKIBA Commercial bank and CRDB Bank are also two big supporters of
microfinance. There are additional organizations involved in microfinance in

109
World population with access to finance (http://worldbank.org) Retrieved on 2/2/2016.
110
http://www.businessnewsdaily.com/4286-microfinance Retrieved on 2/2/2016
111
ibid

47
Tanzania, including FINCA, PRIDE and SEDA as well as the Tanzania Postal Bank.
Community banks and small banks have taken an interest in this, as well as many
NGOs and non-profit organizations.

Initially the main Microfinance can be categorized as non-governmental

organizations (NGOs), Cooperative based institutions namely SACCOS and
SACCAs. The major players in the NGOs category include PRIDE Tanzania,
FINCA (Tanzania), Small Enterprise Development Agency (SEDA) and Presidential
Trust for Self-Reliance (PTF). Others, which are relatively smaller in size, include
Small Industries Development Organization (SIDO), Tanzania Gatsby Trust and
Poverty Africa.112

Additionally there are tiny programs scattered throughout the country mainly in the
form of community-based organizations (CBOs) Banks that are actively involved in
microfinance services delivery include the National Microfinance (NMB), CRDB
bank, Akiba Commercial Bank (ACB) and a few Community/regional banks
namely, Dar es Salaam Community Bank, Mwanga Community Bank, Mufindi
Community bank, Kilimanjaro Cooperative Bank, Mbinga Community Bank and
Kagera Cooperative Bank.113

2.11 Conclusion
This Chapter focused on the conceptual framework on mortgage creation. Hence, it
looks at meaning of different terms accordance with different authors since creation
of mortgage involve different procedures and different institutions.

Therefore in this chapter, a discussion focused on meaning on the concept Mortgage,

history of mortgage accusations, qualities of good mortgage and further look on
current trend of granting loans in Tanzania in general in other hand discussion touch

112
http://www.businessnewsdaily.com/4286-microfinance Retrieved on 2/2/2016
113
ibid

48
these concept security, land as security, registered land and un registered land (un
surveyed land) and lastly microfinance institution since you cannot talk about
mortgage without involve financial institutions.

49
 CHAPTER THREE
THE LEGAL REGIME GOVERNING CREATION OF MORTGAGE BY
USE OF UNSURVEYED LAND IN TANZANIA MAIN -LAND

3.1 Introduction
This chapter focuses on Legal regime that governs creation of mortgage in Tanzania
by use of unsurveyed land as security. Since the legal regime includes both policies
and statutory laws which are applicable. Therefore this chapter provides in detail
Policies, statutory law applicable and the legal procedures for creating mortgage on
unsurveyed land.

3.2 The policy position

Tanzania has several policies and few of them concern or touch‟s area of
Microfinance (banks) which among of them is National Microfinance Policy of
2000114 and MKURABITA of 2007115.

The main aim of the National Microfinance Policy of 2000 is to uplift the life
standard of the people by providing financial services to the poor who are
traditionally not served by other types of finance institutions. The majority of this
targeted group comprises small holder farmers and small businesses. The majority of
these people live on unsurveyed land, and the only security which they possess is
land which is not surveyed or registered.

Therefore the Government introduced this policy for purpose of enabling this people
to access loans by use their land as security in order to eradicate poverty. This was
achieved by introducing the Microfinance (banks) to issue loans or to accept
applicants who use unsurveyed land as security for loans.
114
See item 2.2 of National Microfinance Policy, Ministry of Finance, United Republic of Tanzania,
May 2000 p 8
115
Tanzania Property and Business Formalization Program, 2007 retrieved on 6 th December 2015
from World WideWebhttps://www.google.com/search?q=Tanzania+Property+and+Business+
Formalization+Program%2C+ +2007&ie=utf-8&oe=utf-8&client=firefox-b-ab

50
The MKURABITA Policy of 2007 was also created in Tanzania with the basic
objective of eradicating poverty by making it easier for people to borrow money
from Microfinance institutions by using as security what the majority possess in the
nature of unsurveyed land116 .

The creation or introduction of the twin policies (the National Microfinance Policy
and MKURABITA) have led to changes of legislation for implementation, including
the Banking and Financial Institutions (Microfinance Activities) Regulations, 2014
(GN 298 of 2014), the Banking and Financial Institutions (Microfinance Companies
and Microcredit Activities) Regulations 2005. The Land Act was amended in 2004
in order to provide for the creation of mortgages on surveyed land. The Village Land
Act and their regulations were also adjusted accordingly.

Hence the introduction of the above policies which relate on the Microfinance sector
and creation of mortgage on unsurveyed land. The promulgation of these policies is
one of the factors which have led to changes in the laws in Tanzania to meet the
demands of the policies or to fulfill the requirements because policies cannot be
implemented without laws.

The following hereunder are some of the laws that regulate the microfinance sector
within Tanzania Mainland.

3.3 The Statutory Laws Applicable

3.3.1The Land Act No.4 of 1999 (As amended by the Land (Amendment) Act
No.2 of 2004
Provides that, customary mortgage can be created on unregistered land subject to
the provisions of the Land Act .This shows that the Land Act recognizes validity of a
mortgage on unsurveyed land. The Act provides further for remedies over a

116
Tanzania Property and Business Formalization Program, 2007 retrieved on 6 th December 2015
from World WideWebhttps://www.google.com/search?q=Tanzania+Property+and+Business+
Formalization+Program%2C+ +2007&ie=utf-8&oe=utf-8&client=firefox-b-ab

51
mortgage in case of default. The procedure begins with accessing the services of a
Village Land Council to try to mediate117. The mortgagor may use any remedies
created by Part X of the Land Act118.

The position under unsurveyed land is different from surveyed, whereby in case a
Mortgage defaults to pay back loans, the Mortgagor after accessing the service of
Village Land Council may then invoke any of the remedies under S.126 of the
Land Act, as follows:

3.3.2 Appoint of a receiver of the income of the mortgaged land

Since it is permitted to create a mortgage on unsurveyed land , the mortgagee has
the right to appoint a receiver after submitting to the services of the Village
Council as per requirements of the Land Act119 ,It is he Land Act under Part X
which confers on the mortgagee the power to appoint receiver .

A receiver is an independent and impartial agent appointed by the mortgagee to

accept or receive income arising from mortgaged property. The Land Act120 provides
that it shall be an implied condition in every mortgage, that the mortgagee shall have
power to appoint a receiver of the income of the mortgaged land.

Land Act121 provides for the manner of appointing a receiver, the appointment of
the receiver shall be in writing signed by the mortgagee. Moreover the powers and
duties of the receiver are provided for under the Land Act122 .
This procedure is also relevant and may be used by a mortgagee of unsurveyed land
in case the borrower defaults to pay back loans. A mortgagee has right to appoint a
receiver on a mortgage created on unsurveyed land.

117
S. 115 (2) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
118
See Part X, The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
119
S. 115 (2) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
120
S. 128 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
121
S. 128(3) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
122
S.128 (5) (6) and (7) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.

52
3.3.3 Sell the mortgaged land
Where the mortgagor defaults, the mortgagee may sell the mortgaged property. But
if such mortgaged land is held under the customary right of occupancy, sale shall be
made to any person or group of persons referred to in section 30 (1) and (2) Village
Land Act, 123 that An assignment of a customary right of occupancy may be made to
a person or group of persons not ordinarily resident in a village if and only if qualify
the requirement of the village Land Act.

Sale shall be made to any person or group of persons referred to in The Village
Land Act.124 the mortgagees has the power of sell under S. 132 of the Land
Amendment Act125 which provides that, a mortgagee may after the expiry of thirty
days, from the date of receipt of a notice under section 127, sell the mortgaged land.
There are two ways to sell the mortgaged property, which is selling by public
auction and by private contract. Sell by public auction is provided for under section
132(4) of Land Amendment Act as amended by Mortgage financing (special
provisions) Act, 2008 and sell by private contract is provided for under section
133(3) of the Land amendment Act of 2004 as amended by Mortgage financing
(special provisions) Act, 2008.

The general rule is that, In selling the mortgaged property, the court will never
interfere however where there are fraud or corruption, this can be seen as in the case
of National Bank of Commerce v. Dar es salaam Education and Office Stationary,126
in this case it was held inter alia that, where a mortgagee is exercising its power of
sell the mortgaged property, the court cannot interfere unless there was corruption or
collusion.

123
S.30(1) and (2) of The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
124
The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
125
S.132, of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
126
National Bank of Commerce v. Dar es salaam Education and Office Stationary (1995)TLR 275

53
Therefore Mortgagee has the rights to sell mortgage property this includes mortgage
on unsurveyed land but after follow the procedure provide under the land Act and
The village Land Act, where it require the Mortgagee to issue notice to Mortgagor
and before issuing notice Mortgagee Must try to mediate with village council before
exercise any remedies on mortgage created under customary right of occupancy.

3.3.4Lease the mortgaged land

The law allows the mortgagee to lease or sub-lease the mortgaged property if the
mortgagor defaults to loan. Section 129(1) (a) (b) of the Land Amendment Act 127
provides for mortgagee‟s power of leasing, that a mortgagee shall unless the
mortgage instrument expressly provides to the contrary, have power, subject to the
provisions of this Act and any other law applicable to the leases of land to grant
leases in respect of the mortgaged land or any part thereof, to accept a surrender of
any lease so granted and of any lease affecting the mortgaged land. According to
section 129(5) of the Land Amendment Act provides for the manner of creation of
lease or sublease of mortgaged property, where the mortgagee lease or sublease the
mortgaged property the mortgagee need to serve notice to the mortgagor. Moreover
the powers and duties of mortgagee in lease or sublease the mortgaged property are
provided for under section 129(3) (a-d) of the Land amendment Act.

3.3.5 Enter into possession of the mortgaged land

Since these remedies includes mortgage created on unsurveyed land, after mortgagee
fulfill the requirement of Land Act and Village Land Act.
Section 130 of the Land Amendment Act, 2004 allows the mortgagee to enter into
the possession of the mortgaged property. However entering into possession is
subject to any formalities and the formality is there must be court order. Also there is
manner of entering into possession of the mortgaged property, this is provided for
under the Land Act128.

127
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
128
S.130 (1) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.

54
3.4. Village Land Act Cap 114
Village Land Act has in it provisions which provide creations of Mortgage within
village Land S.2 of the Act provide the meaning of the term Mortgage 129 .But on
other hand Section. 31 (4) (b) the village land Act 130 allows the creation of mortgage
on village land where it provides that
(b) The creation of–
i. a small mortgage; or
ii. a mortgage for an amount equal to or less than the amount for which a small
mortgage may be created; or
iii. a mortgage, reasonable sale or pledge under and in accordance with
customary law in favour of a person ordinarily residing in the village by a
person ordinarily residing in the village for a sum not greater than the sum
which may be obtained by a loan through a small mortgage;

Unsurveyed lands are areas of land which are not surveyed and this type are
regulated by Village land Act since such land fall under the scope of village land
Act. The main purposes this Act is to regulate all land situated within the village
boundaries, and unsurveyed land is within the jurisdiction. The Act provides for the
creations of small mortgages on the land as well as also the register for the recording
of such transactions.

3.5. The Village Land Regulations. GN No. 86 of 2001

This regulations are there for purposes of regulate village land and for this purpose
under the village land , they own Customary right of occupancy and for this reason
for those own this right they land are not registered into centre system of registered
land therefore its known as unsurveyed Land.131

129
S.2 of [ Cap 114 R.E 2002 ] “an interest in a right of occupancy or a lease securing the payment of
money or money's worth or the fulfillment of a condition and includes a sub mortgage and the
instrument creating a mortgage”
130
S. 31(4),(b) of The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
131
GN No. 86 of 2001

55
3.6 The Banking and Financial Institutions (Microfinance Activities)
Regulations, G.N. No. 298 0f 2014
The law was made for the purposes of regulating the microfinance industry within
the country.

Rule 3 (C) of the said Regulations defines microfinance institution in the following
terms:
Microfinance bank means a bank or financial institution which is
licensed by the Bank to undertake banking business mainly with
individuals, groups and micro and small enterprises in the rural or
urban areas132

On other hand the law proceeds to provide the definition of Microfinance Institutions
under
Rule 3 (c) as follows;
Microfinance institution” means an institution engaged in provision
of microfinance loans and which is not regulated by the Bank; 133

The Regulations cited above do stipulate how Microfinance institutions must operate
within the country by providing on how to get licenses, the kind of collateral they
should accept and the main activities of microfinance institutions. But despite the
existence of these regulations the law is silent on how the applicant can access
loans against their collateral in the form of unsurveyed land. This falls under Rule 50
of the Regulations which stated as follow;
“An institution engaged in microfinance activities may extend credit
accommodations secured against unregistered collateral or non-
traditional security or collateral substitute, such as personal
guarantees, contractual pledging of home or business assets,

132
Rule 3 (c) of GN. No.298 of 2014.
133
ibid

56
 compulsory savings or group guarantees where members jointly
guarantee each other‟s loans.134

3.7 Law of Marriage Act, No 5 of 1971

S.59 This Law governs dispositions of property which includes the creation of
Mortgage. The Law requires before mortgaging land which is owned jointly between
husband and wife, there must be consent obtained. The law does not make
distinction between surveyed or unsurveyed land; hence any mortgage must proceed
only when there is consent.135

3.8 Registrations of Documents Act. Cap 117

The registrations of documents Act S. 8 of Registration of Documents Act136
provides for the documents which must be registered , whereby among the
documents which mentioned which involve in assignments and for this purposes the
law is not categorize on whether assignment on surveyed or unsurveyed and for that
reasons for any disposition on unsurveyed land must be registered ,this read together with
137
S. 9 of the same Act which provide for any document which will not registered will
not recognized .Registration of documents involve in mortgage involve unsurveyed land
according require to be registered Rule 34 of The village Land Regulations138 provides
that any disposition involve unsurveyed Land Must be registered ,Where by the law
require any land dispositions and transactions of any type must be registered .

3.9 Consequences of failure to register Mortgage

Its requirement of law that all transaction involves land should be registered, S. 8
and 9 of Registrations of documents Act139 provides for requirement of registration
of documents and for documents which not registered will not recognized, S.62(2) of

134
Rule 50 of GN. No.298 of 2014
135
S.59 of the [Cap 29 R.E 2002]
136
S. 8 of Registrations of Documents Act. Cap 117
137
S 9 Registrations of Documents Act. Cap 117
138
Rule 34 of GN. No. 86 2001
139
S. 8 and 9 of Registrations of Documents Act. Cap 117

57
the Land Act140 this section cemented that any transactions which also involve
mortgage should be registered under the registry specified by the law concern and
the law go further and start that for any transactions which involve land and not
registered shall not have security since did not meet the requirement of the law and
due to above section it‟s clear that a mortgage on un surveyed land is fall under this
provision therefore a mortgage of un surveyed land its mandatory to be registered.

3.10 Legal Procedure for Creation of Mortgages on unsurveyed Land

The Law explained above together with regulations made there to the procedure to
be followed by Both Mortgagee and Mortgagor before grating loan to the
applicants .These procedure are likely the same from surveyed but they only
different due to the status of the Land.141There are three main recognized procedures
followed by Mortgagee and Mortgagor for creation of mortgage on unsurveyed land,
these are Preliminary stage, Drafting and equations of documents.

3.11 Preliminary investigations

A very big part of the preliminary investigations is dominated by the process of
carrying out inquiries which is mainly done by the mortgagee (financial institutions)
before entering into contractual arrangements with the mortgagor. Generally, there
are no specific provisions of the law which specifically provides for the step by step
142
procedures of conducting inquiry. Even the Land Act and the regulations made
there under, provide guidance on what the parties (mortgagor and mortgagee) should
do prior to executing mortgage contracts.143Perhaps the task is left to mortgagees to
guide their customers.144 The following are some of the very important inquiries
which should be made by the mortgagees before entering into contractual
arrangements with the mortgagors.

140
S. 62(2) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
141
ibid
142
ibid
143
Binamungu, C.S. and Ngwilimi, G.S (2006) Regulation of Banking Business in Tanzania: Mzumbe
Books Project,Morogoro P.110.
144
S. 115 (2) of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.

58
3.12 Carrying out Physical verification
In this case a banker as financial institution has obligations to make sure that before
accepting property as security for loans they must view the property to be assured
that property is in existence. But apart from conducting a search, the laws provides
that before entering into contractual arrangements mortgagees are required to
perform a physical verification of the subject property. In the case of National Bank
of Commerce Ltd v B&E Investment Limited and Dorein Francis Kanemile.145:
It was held that a banker has the duty of inquiry and to conducting
physical verification of the owner of the property and the property
itself before advancing a credit facility to the borrower.

Apparently, the statement imposes a duty that goes beyond the parameters covered
under the Land Act on inquiry. 146 .

Therefore the duties ascribed to the banker are to make sure that they carry out
physical verifications to observe if the property exists, however not only that, also a
chance for a financial institutions to ask people who surrounding the loan applicant
like the owner has a wife or husband in order to avoid any cheating, this stage put
both parties in position that if conflict arise they will know which party has not
discharged his duty since a borrower has a duty to disclose all the information he has
relevant to the disposition of the property.

Generally this procedure can used by both surveyed land and unsurveyed since
before these microfinance Institutions accept applicant who use unsurveyed land as
security, they must find all information concerning respective property to avoid
cheating or any encumbrances, the message is that financial institution must collect
data from different sources and triangulate the same in order to avoid later conflict
between financial institution and customers. 147

145
National Bank of Commerce Ltd v B&E Investment Limited and Dorein Francis Kanemile No.14
of 2002 High Court of Tanzania Commercial Division of at Dar es salaam.(Unreported)
146
See, Part X of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
147
See, Part X of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.

59
3.13 Securing informed consent from spouse/spouses
The law of Marriage Act, S.59 This Law governs dispositions of property which
includes the creation of Mortgage. The Law requires before mortgaging land which
is owned jointly between husband and wife, there must be consent obtained148. The
law does not make distinction between surveyed or unsurveyed land; hence any
mortgage must proceed only when there is consent from other spouse ,therefore a
borrower must submit evidence that , he she already obtained consent from his or her
fellow.

But also under S.161 (3) (a) of the Land Act149, provides that any dispositions
involve matrimonial property, must be accordance with the Law of Marriage, where
the position of the law for other spouse to obtain consent from other spouse.

That both provisions impose a duty on the lender to inquire about spouses in case the
proposed landed property is a matrimonial home. The law requires the lender to
obtain a signature or evidence from the document used in application for a loan from
any “spouse”. It is a responsibility of the mortgagor to disclose that he has a spouse
or not and upon such disclosure the mortgagee shall be under the responsibility to
take reasonable steps to verify whether the applicant for mortgage has or does not
have a spouse.150 It shall be responsibility of mortgagee to take reasonable steps to
ascertain whether the applicant for mortgage has a spouse or spouses.

Furthermore under section 114(a) and (b) of the Land (Amendment) Act151 requires
inter alia that,
S. 114. A mortgage of matrimonial home including a customary
mortgage of a matrimonial home shall be valid only if:
i. any document or form used in applying for such a mortgage is signed
by, or there is evidence from the document that it has been assented
to by the mortgagor and the spouse or
148
S.59 of the Law of Marriage Act, No 5 of 1971[Cap .29 R.E.2002]
149
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
150
S. 8 of the Mortgage Financing (Special Provisions) Act, No 17 of 2008.
151
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.

60
 ii. Any form or document used to grant the mortgage is signed by or
there is evidence that it has been assented to by the mortgagor and
the spouse or spouses living in that matrimonial home.

From the wording of the statutory provisions cited above, it is mandatory that the
signature of a spouse be put on documents used to secure a credit under a mortgage
and the laws does not categorize the specific land due to this for the ones who create
mortgage by use of unsurveyed land a Lander has a duty also to know if there is
spouse consent if is matrimonial property.

The similar position was maintained in a number of precedents for instance in Royal
Bank Scotland plc v. Etridge152where Lord Hob holds that:
Once on inquiry, the bank must ensure that the spouse has
independent advice and a certification that they have formed a truly
independent judgment.

However some of the jurisdictions were against the requirement of the consent from
other spouse as explained here in above in the case of Caunce v. Caunce153 in this
case the husband mortgaged the house without inform her wife. The Banker never
inquired about it, unfortunately the husband failed to pay back loan, but when the
fact came to hand of wife the court said that “the wife is mere shadow to the
husband no need a banker to inquire about the land”. Therefore from the above case
the court provides no need of consent from spouse.

However that legal position never lasted long in the case of Hodgson v. Max.154 It
was about one old Lady who lived alone in her personal house and later she took Mr.
X and started to live with him as a man of substance, later she decided to transfer her
property to him (Mr. X) with intention to remain as un equitable owner afterwards
the gentleman sold the property to someone else. Then Later Hodgson filed case
against Max, the Court of Appeal made judgment in favor of the lady and said that a

152
Royal Bank Scotland plc v. Etridge No 2 (2001) UKHL 41
153
Caunce v. Caunce (1969) 1 ALL ER 722
154
Hodgson v. Max (1971) CH .892

61
buyer has duty to inquiry on history of the occupation of the Land. Due to the reason
above banker has a duty to inquiry on mortgage property.

Where the mortgage concerns a matrimonial home155, it will only be valid in the
following circumstances:
any document used in applying for such a mortgage is signed by the
mortgagor and his spouse(s) living in that matrimonial home or there
is evidence from the document that all of them have assented: Or any
document used to grant the mortgage is signed by the mortgagor and
the spouses (s) living in that matrimonial home or there is evidence
that both or all of them have assented.156

Despite the two steps the mortgagee may devise some other steps as he may deem
appropriate and desirable to satisfy himself that the assent was genuine and
informed157For example, in the Decision of Royal Bank Scotland plc v. Etridge158
Lord Hob -house argues as follows:
Once on inquiry, the bank must ensure that the spouse has
independent advice and a certification that they have formed a truly
independent judgment.

Microfinance institution has no option in conducting a comprehensive research about

property and borrower whenever they take part in mortgage arrangements. A
genuine informed spouse‟s consent must be secured before disbursement of funds is
effected; otherwise, the mortgage transaction is rendered invalid.159

The court‟s interpretation of S.59 (1) of the Law of marriage Act,160 in favors of
mortgagees is now gone, in Maria Goreti Katura Mutarubukwa v. NBC, Innocent

155
See Form No 42 of GN. No. 43 of 2005
156
S. 114 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
157
GN. No. 43 of 2005
158
Royal Bank Scotland plc v. Etridge No 2 (2001) UKHL 41
159
Binamungu, C.S. and Ngwilimi, G.S (2006) Regulation of Banking Business in Tanzania: Mzumbe
Book Project, Morogoro P. 117.
160
The Law of Marriage Act, No 5 of 1971[Cap .29 R.E.2002]

62
Chacha Magoti Nshoya and Leonce Benedict Mutarubukwa, Land.161The provision
entitles a spouse‟s consent in disposition of matrimonial properties.

In the case of Idda Mwakalindile v. N.B.C.Holding Corporation and San Saijen

Mwakalindile162 the appellant was neither aware nor did she consented to the house
being mortgaged but the court ruled in favors of the respondent the banks because of
what the court argued that there was not caveat to protect the registrable interest of
the appellant and thus there was no way in which the first respondent could know
that the house was matrimonial property and thus the case was dismissed.

3.14 Contractual arrangements

In this arrangement once a mortgage is clear about the security to be offered as
security, the next procedure is drafting of contractual document takes off. The
documents are prepared in line with principles of the law of Contract Act.163
However they said law does not tell a person explicitly as to what should be done,
but it impliedly informs a knowledgeable person the principles to bear in mind when
considering the contractual parties and their position in life, terms of contract, and
object of the said arrangements.

3.15 Drafting Contractual Documents

There is no specific number of documents that make a set of documents for a single
mortgage arrangement164. In practice, a mortgage arrangement entails execution of a
loan agreement, mortgage deed, and document to prove consent where property is
matrimonial property.

161
Maria Goreti Katura Mutarubukwa v.NBC, Innocent Chacha Magoti Nshoya and Leonce Benedict
Mutarubukwa, Land Case No.28 of 2004, High Court of Tanzania Land Division at DSM
(Unreported).
162
Idda Mwakalindile v. N.B.C.Holding Corporation and San Saijen Mwakalindile Civil Appeal No.
59 of 2000,Court of Appeal of Tanzania at Mbeya (unreported).
163
The Law of Contract Act ,[Cap. 345 R.E.2002]
164
S.113 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.

63
The land Act leaves a room for the mortgagee to provide guidance to borrower.165
Also leaves everything to mortgagees to fix terms of the contract saves for the
covenants, conditions and powers implied in mortgages166. The key aspect, which is
central to mortgage contract is aspect of interest rate. It is crucial to the mortgagees
because this is their main interest in the whole matter of mortgage. 167 The law does
not guide mortgagees on how to fix the interest rate.168 Further there is no ceiling of
such interest rate.

Lastly for these Microfinance they don‟t have specific forms which they can use
during contractual stage rather than they decided to use their own forms ,Fore stance
when you go Finca and Nmb you will find each institutions use their own form ,
apart for those who ask loans by use of surveyed land .Therefore the presence forms
in Land forms they are relevant for those who use surveyed land rather than
unsurveyed land this give room for this Microfinance institutions to come with their
own form for those applicant use unsurveyed land as security of loans.

3.16 Registration of Mortgage Created On Un surveyed Land

The registrations of documents Act S. 8 of Registration of Documents Act169
provides for the list of documents which must be registered , whereby among the
documents which mentioned which involve in assignments and for this purposes the
law is not categorize on whether assignment on surveyed or unsurveyed and for that
reasons for any disposition on unsurveyed land must necessarily be registered ,this read
170
together with S. 9 of the same Act which provide for any document which will not
registered will not recognized .Registration of documents involve in mortgage involve
unsurveyed land according require to be registered Rule 34 of The village Land

165
S.113 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
166
S. 124 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
167
Binamungu, C.S. and Ngwilimi, G.S (2006) Regulation of Banking Business in Tanzania: Mzumbe
Book Project,Morogoro P. 118.
168
S. 120 and 124 of The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
169
S. 8 of Registrations of Documents Act. Cap 117
170
S 9 of Registrations of Documents Act. Cap 117

64
Regulations171 provides that any disposition involve unsurveyed Land Must be
registered ,Where by the law require any dispositions and transactions must be
registered.

This means that for a mortgage involving land which is compulsorily registered. S.
62 (2) of the Land Act172, provide that: registered173
S. 62(2) no instrument effecting any disposition under this Act shall
operate to sell or assign a right of occupancy or create, transfer or
otherwise affect any right of occupancy, lease or mortgage until it has
been registered in accordance with the laws relating to the
registration of instruments affecting the land in respect of which the
disposition has been made.

Also S.21 of the Village land Act174, provides that:

S. 21. The Village Land Council shall maintain register of village land
in accordance with any rules which may be prescribed by the Minister
and Village executive officer shall be responsible for keeping register.

Due to the above requirement of the Laws any disposition of the land including
mortgage shall registered in the respective register.175 A mortgage created on village
land is required to be registered under village respective register S.113 (4) of Land
Act176,provide that in respect of a mortgage other than a mortgage of land
registered under the Land Registration Ordinance177,it shall take effect only when it

171
Rule 34 of GN. No. 86 of 2001
172
The Land Act, No.4 of 1999 as amended by Act No. 2 of 2004.
173
S. 8 and 9 of Registrations of Documents Act Cap 117
174
The Village Land Act, No. 5 of 1999 [Cap 114R.E 2002]
175
Mwaisondola, G.N(2007).The modern law of mortgage in Tanzania ,the role of
Land Act,1999:School of Law the University of Birmingham. Retrieved on 2nd
March 2016 from World wide web
https://www.google.com/search?q=Mwaisondola%2C+G.N%282007%29.The+mo
dern+law+of+mortgage+in+Tanzania+%2Cthe+role+of+Land+Act%2C1999%3A
School+of+Law++the+University+of+Birmingham.+&ie=utf-8&oe=utf-
8&client=firefox-b. p 171
176
Ibid ,P148
177
Land Registration Ordinance (Cap 334).

65
is registered in prescribed register and a mortgagee shall not be entitled to exercise
any of his remedies under that mortgage if it is not so registered.

One may opt under S. 11 of registrations of document Act to register in the register
of documents a mortgage of unregistered land.178 Thus upon registered Mortgage
shall have effect as security and shall not operate as transfer of estate there by
mortgaged but the lender shall have all the powers and remedies in the case of
default and he subject to all the obligations that will be conferred or implied in a
transfer of the land subject to redemption.

3.17 Conclusion
This chapter is centered at legal regime governing creation of Mortgage in Tanzania.
It first looks at the policies which are created for the purposes of eradicating poverty
and only to enable the low income earners to access loans from Microfinance by use
of their collaterals commonly being land.

Majority of these people live in villages and the main or sole collateral they have is
land and which is not registered (it is unsurveyed land). This chapter discuss on the
laws which was enacted to implement the policies which are which regulate whole
procedures of access of loans from Microfinance by use of unsurveyed land as
securities for their loan applications.

178
Land Registration Ordinance (Cap 334).

66
 CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.0 Introduction
This study is with the purpose of Analysis of Law and Practice on Access to Loans
in Microfinance Institutions by Use of Unsurveyed Land as security and why some
of these microfinance institutions are reluctant to accept mortgages on unsurveyed
as security for their loan applications. With these objectives in mind the researcher
has interviewed different groups of people based on a questionnaire as primary data
and has achieved success in data collection from loan officer working at different
Microfinance Institutions, lawyers from different firms who are experts on mortgage
issues, lecturers from different institutions and lastly to the Tanzania Association of
Microfinance Institutions (TAMFI).

This Researcher has also managed to collect data from literature review, case law,
and reports from different sources including library, internet sources and reports.
During the research period the Researcher was able to meet with four(4) respondents
who work at TAMFI (the Tanzania Association of Microfinance Institutions),
twelve (12) loan officers working at different Microfinance Institutions, nine (9)
lawyers from different firms who are experts on mortgage issues, five (5)lecturers
from different institutions and these institutions have responded in the manner set
out in the paragraphs below.

4.1 Unsurveyed Land as Security for a Mortgage

To understand whether unsurveyed land can attain the quality of good mortgage to
access loan from this Microfinance institutions, respondents among of those asked
said that unsurveyed cannot attain qualities of good Mortgage and give their

67
reasons, namely that:- Some of Microfinance Institutions are reluctant to accept
unsurveyed land as good collateral One interviewee prove that179
Kaka ni vigumu mtu kupewa mkopo akiweka dhamana ardhi ambayo
haijapimwa ama kusajiliwa, kwa kuwa ni vigumu kujua kwamba hilo
eneo analoombea mkopo je likipimwa kwa baadaye litakuwa eneo la
barabara, eneo la wazi, ama matumizi ya kijiji ama serikali. Hivyo
basi, tunachelea kumpa mkopo mtu wa jinsi hiyo ingawa sheria
inaruhusu kupewa mkopo.

This can be literally interpreted as; It is difficult for a person to be granted a loan if
he pledges unsurveyed land as security, because it is difficult to verify whether the
land against which he is seeking the loan, in the event that land is surveyed will turn
out to have been intended as a road reserve, an open space, or allocated to a village
or to government use. On this ground we are disinclined to advance a loan to an
applicant although the law permits such a grant.

Another respondent on the same as whether unsurveyed land can attain quality of
good security respondent that the purposes of Financial institutions is to return back
their money if mortgagor default to pay back loans and for case of unsurveyed land
is not easy to exercise remedy of sell by mortgagee since the attribute of the property
, because you may found the land found far away from urban center and due to this
will take a time to lender to return back their money but on the same it‟s not easy to
estimate the value of unsurveyed land un like surveyed land180 .

Despite of the position concern unsurveyed land as not good collateral still
unsurveyed land can be a good collateral if there will be the law in place that
recognize and harmonize as good collateral for example Land which under
customary right of occupancy, Residential licenses and sales agreement and the law
should provide on what remedy a financial institution will resort to. If one day the

179
A lawyer who was previously worked with Finca head quarter was conducted on 12 January
2016 in Dar es salaam
180
A lawyer who works at UTT, during an interview conducted on 16/11/2015at Dar es Salaam.

68
land be surveyed, it might be revealed that the space is reserved for use as passage
(road), village reserve, government reserve or public utility land and therefore such
land is will be reliable for use as security for a loan.

4.2 Ownership proof of unsurveyed land

The researcher inquired from the respondents whether it‟s easy to prove ownership
of unsurveyed land. Regarding the above respondents , respondent that is not easy
to prove ownership under unsurveyed land un like the one who own surveyed land
and gives reasons that :-

One respondent lamented that the major stumbling block when it comes to
unsurveyed land pledged by an applicant to secure a loan is how to prove ownership,
because unsurveyed land is always unregistered. So it becomes difficult for them to
prove title because they have no title deeds for the said property.181.

Respondents on the same as whether it‟s easy to prove ownership of unsurveyed

land? The respondent stated that since it is the duty of the lender to do search, he
must among other things find out information on whether the applicant is the right
owner of the said land. In respect of surveyed land the loan applicant will be
required to bring his title deed and the lender can further go on for a document
search in the Land Registry. If the land was registered it is easy to access
information on the said land while for unsurveyed land information related to such
land cannot always be searched in one centre. You can only get information which
may help you to reasonably believe from available documents whether in a particular
case one piece of land is owned by different people. Different documents may be

181
Loan Officer who works at FINCA during interview was conducted on 6 th January 2016 at
Tarime

69
made available, one person will have a sale agreement and another may produce a
residential license182.

The respondents which this researcher managed to interview base on their reasons
that in order to prove ownership of the land should have a document and the only
document which can be easy to proof is only title deed since any one can access and
have the status of the land a part of unsurveyed land which is not easy to determine
if there is any encumbrance.

4.3 Procedure for creating mortgage on unsurveyed land

Respondents who were asked as to whether the procedure for creating a mortgage on
unsurveyed land is clear, said that procedure for the creation of a mortgage on the
basis of unsurveyed land has a lot of uncertainties varying from one institution to
another and is typically not regulated and respondents have given an explanation in
the following terms:-
Hawa Micro-finance benki mfano ukiangalia FINCA na PRIDE, fomu
ambazo wanatumia uombaji wa mikopo kwa kutumia ardhi ambayo
haijasajiliwa kama dhamana,mahitaji ya hizo fomu ni tofauti na wale
ambao wanaomba mikopo kwa kutumia ardhi iliyosajiliwa (surveyed
land). Kuna fomu maalumu ambazo zinatumiwa na kila taasisi ya
kifedha ambazo ni mortgage form. Hivyo basi ni kweli kabisa hakuna
fomu maalumu ambazo waombaji wa mikopo kwa kutumia ardhi
ambayo haijasajiliwa watumie kama ambavyo waombaji kwa kutumia
surveyed land. Fomu maalumu zipo katika land regulations183

Which is liberally translated means that:

“As regards micro-financial institutions like FINCA and PRIDE, the forms used for
loan applications in respect of unsurveyed land to secure loans, the conditions for
these application forms are different from those applicable to borrowers who use
surveyed land as security. There are specific forms for each financial institution
182
Lecture of work at Tumaini University Dar es salaam Branch department of Law, interview made
on 29 March 2016 at Dar es salaam, and During interview with Loan officer working with Pride
in Mwanza interview was conducted on 8th December 2015.
183
During interview with Loan officer who works at Pride in Mwanza interview was conducted
on 8th December 2015

70
which operate as mortgage forms. It is therefore quite true that there are no special
forms which are available to loan applicants in respect of surveyed plots which can
be used for applicants with unsurveyed plots. The special forms are contained in the
land regulations”.

On this same aspect, (4) four respondents were asked on whether the procedure for
creating mortgage on unsurveyed land is clear, Land to operate as good security
should have the following qualities namely, it should maintain a reasonably stable
value throughout the year, should readily be realizable in all conditions with a safe
and unquestionable title, without pending controversial claims and expense and
should be free from liabilities to third parties. Such qualifications are necessary for
the purpose of protecting the interests of financial institutions. However these
qualifications are only found in registered lands184.

The Government of Tanzania has not put in place adequate regulations to protect
micro-finance institutions from defaulters especially borrowers using unsurveyed
lands to secure loans, mainly because such defaulters are always only pestered to
repay loans through peaceful negotiations rather than through such penalties as
transfer of their lands185.

To access loans from these institutions using unsurveyed land you need a letter from
the clan-head and two (2) neighbours who own bordering plots of the said land as
witnesses. But are all these requirements necessary considering the fact that the
person who needs a loan from the microfinance institution may corrupt all these
people in order to get their certifications that he is the right owner of the property,

184
Executive Director of Tanzania Associations of Microfinance institutions found in Dar es Salaam,
the interview based on questions found in questionnaire conducted on 30 th March 2016 at Dare es
salaam.
185
MD, Crest attorneys in Dar es Salaam work as lawyer of Advance banks, interview conducted on
7th April 2016 at Dar es salaam

71
and if he or she later defaults to pay back loans and runs away it will take the
financial institution time in order to trace the person concerned186.

He also lamented that, to access loans from these institutions using unsurveyed land
you need a letter from the court of law or a commissioner for oaths proving the
physical address of the said land and other supporting documents from the clan-
head.187

This clearly proves that there is no uniformity in the whole process, that is why the
micro-finance institutions are complaining of improper regulations and therefore the
dangers of systemic credit risk in which default borrowers worsen the whole system
apart from those who use surveyed land as security since the law is not clear on
which are the forms required forms to be filled.

4.4 Laws regulating microfinance institutions in Tanzania

Respondents were asked as whether the present laws regulating microfinance are
adequate to promote and protect access to loans by use of unsurveyed land. Eight (8)
respondents responded to the above question, and one report came from a Member
of Parliament. They are saying that the present laws are not adequate in promoting
and protecting access to loans from microfinance institutions by use of unsurveyed
land. The respondents give their reasons quoting section 115(2) of the Land Act
which provides that-
Where the mortgagee under a customary mortgage seeks to exercise
any customary remedy which involves or may involve the mortgagor
being disposed or permanently deprived of the occupation of the
mortgaged land, the mortgagee shall, after using the services of the
Village Land Council, try and mediate on the application of the

186
Lecture, work at University of Dar es salaam interview made on 29 th March 2016 at Dar es Salaam.
187
During interview with Loan officer working with NMB in Tarime interview was conducted
on13st December 2015 at Tarime , During interview with Loan officer working with Tujijenge
in Mwanza interview was conducted on 10th December 2015

72
 proposed or any other remedy, make an application to the Village
Land Council for an order authorizing the exercise of that remedy188”

In reliance on the above section when a borrower defaults to pay back loans obtained
from a Microfinance institution or banking institution, the mortgagor who is a bank
may seek to exercise customary mortgage remedies, such as the appointment of a
receiver of the income of the mortgaged land, or leasing the mortgaged land or
where the mortgaged land is of a lease, to sub-lease the land, to enter into possession
of the mortgaged land; and to sell the mortgaged land. But the bank as the mortgagee
is required by this section to approach a Village Council and try to mediate on the
issue concerning the defaulted loan.

The main aim of these financial institutions is to receive profit on time. However
due to above legal requirements of consulting with the Village Council and mediate
when the borrower defaulted to pay back monies he received as a loan, the banks
will expend a lot of their time to mediate on the default of a client. It must be noted
on other hand that the said section does not disclose or limit the speed track of the
said mediation so the process can take a long time in which to the Financial
Institution is incurring a loss to that effect.

The Microfinance Regulations of 2005 which were expected to guide the industry
are not friendly to microfinance services providers, since regulations provides only
how to get incense for the one who want to open microfinance institution but the
Regulations is silent on how this Microfinance into customer , fore stance the law
does not disclose on how this microfinance will provides banking activities since
this is their main activities for stance on how to access loans by use of unregistered

188
This question was answered by six (6) respondents, four Loan officer and two (2) Lawyers
working with different institutions at Mwanza, Tarime and Dare es salaam at different day they
address the same issue.

73
collateral, the rule only provides that this Microfinance suppose to accept unregister
collateral but the law is silent on how to provides the service189.

Another respondent lamented that the government has indeed introduced the
Microfinance Policy and the MKURABITA Policy, but since 2000 up to date the
government has been silent on the microfinance law, Therefore the lacuna of laws
which regulate microfinance institutions have led each institution to have its own
way of issuing loans and this has led some of the microfinance institutions being
reluctant to issue loans for those who use unsurveyed land as security for loans for
example when you go Pride they have their own way of regulate the trend unlike
surveyed land where by the procedures are clearly and there is forms which used to
create mortgage 190. One Member of Parliament in the National Assembly has stated
that-
Serikali sasa inatakiwa kutengeneza sheria ya hizi Microfinance kwa
maana tangu mwaka 2000 mpaka leo hakuna sheria za kueleweka na
zinazo ongelea jinsi gani wapewe mkopo wajasiria mali wadogo
wadogo ambao ndiyo walengwa.

Which interpreted that government had took a lot of time to prepare microfinance
law now it‟s time for government to come with the law191.
The majority who responded to the questions as whether the present laws are
adequate on protecting and promote access to loan in microfinance by use of
unsurveyed land from the questionnaire and through oral interviews have lamented
that it is not easy for applicants who look for loans from microfinance institutions to
obtain the requested loans, despite the provisions of the law, since the lawmakers
have not yet put in place the procedural law which will guide the microfinance

189
Executive Director of Tanzania Associations of Microfinance institutions found in Dar es Salaam,
the interview based on questions found in questionnaire conducted on 30 th March 2016 at Dare es
salaam.
190
Executive Director of Tanzania Associations of Microfinance institutions found in Dar es Salaam,
the interview based on questions found in questionnaire conducted on 30 th March 2016 at Dare es
salaam
191
One of Member of Parliament when addressing Parliament on the contributions of Microfinance
institutions toward economic growth on 24 may 2016

74
institutions to grant loans to those who desire their unsurveyed land to be used as
security .

4.5 Search or inquiring of unsurveyed land

Respondents were asked as to whether it‟s easy to access information on unsurveyed
land. These Respondents said that it is not easy to access information on unsurveyed
land. Four (4) of the respondents have lamented that it is not easy to access
information on unsurveyed land and they support their view based on the reasons
that:-

“information based on registered land is easy to access since all information was
centralized while data on unsurveyed lands are not preserved in any formal records
and are not in any government archives so it is not easy to determine whether or not
such lands have any encumbrances .This state of affairs makes it very difficult to
trace relevant information pertaining to the land and thus it is not easy for lenders to
give loans to applicants on the security of such un-recorded lands192.

The problem is where can one verify all the information or data stated by the client
who pledges unregistered land as security for loans? The Respondent continued to
explain that for the registered land it is an easy and simple task to conduct a search,
but not for unregistered (unsurveyed land).If you conduct search on surveyed land
the registry will give out any encumbrances attached to the said registered land,
which will enable the Microfinance institutions to decide whether or not to grant
loans to the borrower depending on the nature and existence of encumbrances193.

Also this institution will be able to check every entry and other documents, then will
compare with the information received from client. Evidently all information

192
Lawyer who works at UTT, during an interview conducted on 16/11/2015 at Dar es salaam.
193
Loan Manager who works at Access Bank Mwanza branch, an interview conducted on 6 January
2016 at Mwanza Region , the same was responded by , Loan Manager who works at Access Bank
Mwanza branch, an interview conducted on 6 January 2016 at Mwanza Region.

75
concerning surveyed land is centralized in a single system where a bank may search
easily, which is not the case for unsurveyed land for which you cannot easy find the
relevant data and information together as codified and organized as is the case in the
land registry194.

It is due to this situation some of Financial Institutions are reluctant to accept some
lands to be used as security since they lack enough information to accept them for
security. Therefore base on argument from different respondent its fact that it‟s not
easy to access information on unsurveyed land as surveyed since the information of
unsurveyed land not centralizes as surveyed land.

4.7 Applicability of other document apart from title deed as evidence of

ownership.
Respondents were asked as to whether financial institutions may accept other
documents apart from a title deed as evidence of ownership , three (3) Respondent
replied to the effect that it‟s not easy to recognize a sales agreement, a residential
license and other documents apart from a title deed as enough evidence to proof of
ownership of land. It is contended by the Respondents that-
Serikali imeanzisha mpango wa kuwapa watu hati za makazi za muda
mfano Dar es Salaam ili waweze kutambulika, lakini kuna changamoto
ya kuwa unakuta mtu anamiliki hati ya makazi, hati ya kimila pamoja
na hati halali na anatumia kuomba mkopo na zinakubalika mfano
Dare es salaam ilishatokea mtu akaomba mkopo sehemu mbili tofauti
kwa kiwanja kimoja. Hivyo sheria haijatoa ukomo Wa kutumika Na Ni
mazingira yapi unaweza kutumia hati ya kimila, hati ya makazi Na
hati Kama hati, hivyo inatuwia vigumu Kama taasisi ya fedha kumpa
mkopo mtu kama huyo anaweza kukuingiza kwenye matatizo.”195
194
Loan Manager who works at Access Bank Mwanza branch, an interview conducted on 6 January
2016 at Mwanza Region , the same was responded by , Loan Manager who works at Access Bank
Mwanza branch, an interview conducted on 6 January 2016 at Mwanza Region
195
One of Lecture who works at University of Dar es Salaam , an interview conducted at Dar es
Salaam on 24,February 2016. MD, Crest attorneys in Dar es Salaam working as a lawyer of
Advance banks, interview conducted on 7th April 2016 at Dar es salaam, During interview with
Loan officer working with Finca in Tarime interview was conducted on 7th January 2016 at
Tarime ,That on applicability of Residential licenses, offer and other document issued for those
own un surveyed land ,on their effects and the same on applicability of the Land law on mortgage
transaction .

76
This is substantially translated as follows:
The Government has introduced a system of issuing temporary residential licenses,
for example in Dar es Salaam, for the purpose of identification, but there are
challenges as you may come across a person who possesses a residence permit, a
customary title as well as a title deed. In respect of a person who asked for a loan
which was approved by two institutions in respect of the same plot. This shows that
the law has not laid down a limitation of use or the under which circumstances one
can use the customary title, residence permit, so it makes it difficult for us as
financial institutions to advance a loan to such person, who can cause you
problems.”

A person applying for a loan is charged with the responsibility to produce a

residential permit issued by the land authority but such permits are not automatically
recognized by the loaning institutions, and this makes it very difficult to acquire
loans by producing a residential permit.

4.10 Due diligence conducted by local government authorities

To understand whether the intervention of the local government authorities can
assist a lender to ascertain whether the plot of land in question has any
encumbrances, five (5) respondents among those asked said that some of local
governments authorities provide false information.

In addition, it is further argued, since some of the local government leaders do are
conducting due diligence, a financial institution may require the client to come up
with a letter from the local government authority with proof that he is resident of
that area , and also a letter to show that he is the owner of the subject land. A client
may bring a letter to show that he is the owner of the said farm196.

196
Loan Manager who works at Access Bank Mwanza branch, an interview conducted on 6 January
2016 at Mwanza Region and Lawyer who works at UTT, during an interview conducted on
16/11/2015 at Dar es salaam

77
Then as lender since you do not have any place to go for further search, since the
land is not registered you decide to ask a client go before the court law to swear or
affirm in order to prove his or her ownership of the unregistered land in question.
Since the due diligence is conducted by the local government, that individual may
attain all the evidence anyway. But when the borrower defaults to pay back loans on
the stipulated time and when the financial institution wants to sell properties or to
exercise any remedy to recover the loan, another person may appear and say that he
is the true owner of the said property. If this happens it will be difficult for the
financial institution concerned to exercise its rights quickly197.

Surely the absence of a coordination system to prove the right owner of the land
causes a hard time for a bank to know the right owner and it may decide to believe
this local government leader with the risk of receiving false information. These are
some of the legal challenges facing microfinance institutions and banks if they dare
to accept unsurveyed plots of land as security for mortgages since the law does not
provide a comprehensive or sufficient procedure to follow before, when and after
issuing loans. Further for the avoidance of false information the micro finance
institutions sometimes refuse to grant loan based on unsurveyed land, in which case
the situation affects borrowers who want loans in good faith. So the government and
Parliament should look upon this area so that they can enact laws which help
Tanzanians put use their unsurveyed land as security for mortgage198.

Complications arise for enforcing remedies in case the borrower has defaulted. The
process of seeking the leave of the court is complicated and time wasting. Therefore
the recovery of possession shall take time different from enforcing a legal mortgage.

197
Executive Director of Tanzania Associations of Microfinance institutions found in Dar es Salaam,
the interview based on questions found in questionnaire conducted on 30 th March 2016 at Dare es
salaam
198
Lawyer who was previous work at Tujijenge at Mwanza , an interview conducted on 8 january
2016 at Mwanza

78
4.11 Conclusion
From the data collection , which have depended on the research questions, the
majority who responded to the questions from the questionnaire and through oral
interviews have lamented that it is not easy for applicants who look for loans from
microfinance institutions to obtain the requested loans, despite the provisions of the
law, since the lawmakers have not yet put in place the procedural law which will
guide the microfinance institutions to grant loans to those who desire their
unsurveyed land to be used as security. It is not be surprising that the majority of
citizens have never attained the requirements of the financial institutions in the
absence of appropriate laws which will protect the interests of all parties to the loans

79
 CHAPTER FIVE
CONCLUSIONS RECOMMENDATIONS AND OF THE RESEARCH

5.2 Conclusions
This dissertation examines Access to loans in Microfinance institutions by use of
unsurveyed land as security Analysis of laws and practice in Tanzania Mainland. It
is observed that the laws are not adequately framed. There are no clear provisions
which address issues of unsurveyed land.

The low income gain in Tanzania are living within villages and they own plots or
tracts of land which are almost invariably all unregistered (unsurveyed).There is an
exceptional need of formalizing the existing land tenure of the villagers in order to
uplift their economic life standards, nothing specifically that by far the biggest
portion of the population of Tanzania live in villages, and the glaring need is
balancing the interests between the financial institutions, the villagers and other
relevant stakeholders.

All in all this research covers a large area of unsurveyed land in respect to mortgage
types of mortgages legal requirements, rights and obligations of parties together with
recommendations to be adopted by stakeholders be it the Government, Parliament,
the Judiciary and members of the society at large. This is also a call to those authors
who forget to address mortgages in relation to unsurveyed land.

5.1 Recommendations
Laws that provide for the creation of such services to provide loans to people using
unsurveyed land but without specific laws which provides on how microfinance
institutions will provide loans for those who use unsurveyed land therefore
presence laws are only to regulate the transaction. The microfinance institutions need
documents which prove ownership of properties, but unfortunately unsurveyed lands

80
have no clear documentation which they may present before these financial
institutions to prove ownership.

During fiscal study we found out that it is not easy to conduct a search on
unsurveyed land since all data concerning unsurveyed land are not pooled in one
centre or codified like those for surveyed land where you may go to the Land
Registry, and verify whether there are any encumbrances or not. This is not an easy
task to do in respect of unsurveyed land.

In case a borrower defaults payment of a back loan most of the time these financial
institutions find challenges in exercising remedies because the law requires the
lender to consult with the village council and to try to mediate before exercising any
remedy which is very difficult to the microfinance side. The financial institutions
only have an option to sell property and get back their money. This procedure is
likely a waste to their time and the treatment is different to those who posses title.

The study is intended to demonstrate how the government can revisit the
Microfinance institutions legal and regulatory regime with the object to effectively
promote the availability of loans to those who would pledge unsurveyed land as
security. It is urged that the government enact laws which will enable microfinance
institutions to boost the living standards of the people and ultimately contribute
towards the economic development and prosperity of the country. Also the
Government should come up with rules and regulations that will minimize default
risks to those who rely on unsurveyed land as security for the purpose of protection
for both lender and borrower.

Provisions are very stringent to the applicants who offer unsurveyed land as security
for their loans as opposed to surveyed plots. For example under unsurveyed land the
applicant requires to consult village officers to prove that he/she is the owner of the

81
said property. It must be verified before the court and there may be additional
requirement depending on the policy of the particular financial institution.

5.1.1: Recommendations to the government of Tanzania

Government should speed up the survey and registration of unsurveyed land, and
this could be only way out for financial institutions like FINCA, NMB, UTT, Pride,
Access Bank, Tujijenge and others to expand the scope of their lending to the
people. Universal land survey and mapping will also speed up the provision of loans
by these financial institutions since all the land will be safe position for use as
collateral.

But mean while the government should create an alternative method to make sure
that all information related to land, are easy to access as in surveyed land. That is to
say, when you want to access information whether there are any encumbrances or
not, you should be able to the land registry search for and find all information
necessary to the particular land, which is at present impossible to do in respect of
unsurveyed land.

The Government and the policy makers should come with laws which will facilitate
access of loans by use the said land and not only provisions of law but should state a
clear procedure which these two parties should follow. Financial institutions
(lenders), borrowers should make use of a procedure that each part is in a good
position in case of default or any fraud between these two sides and the only way to
rescue this situation if only the government to come with proper laws regulating the
whole transaction.

A large number of Tanzanians live in villages and indeed most of them own landed
properties which are almost invariably unsurveyed. There is an exceptional need of
formalizing such kind of landed assets for recognition as good loan security to uplift
their economic standards.

82
This study is recommending the government to give consideration to the
Microfinance institutions law and regulations which regulate allocation of loans for
those who use unsurveyed land as security.

Hence the government should enact laws to enable microfinance institutions to boost
the living standards of people and ultimately contribute towards the economic
development and prosperity of the country. Let also the government come up with
rules and regulations to prevent default risk on those who use unsurveyed land as
security for protecting both lender and borrower.

There exists no procedure to coordinate tracking and analysis of microfinance

operation.
The government has the duty to provide an environment and protect both financial
institutions and customers by enacting relevant laws and making appropriate
policies, which will enable microfinance institutions to give loans to customers
without any fear when the procedures founded are clear to those who use unsurveyed
land as security for loans.

83
 REFERENCES

Books
Binamungu, C.S., Ngwilimi, G.S (2006). Regulation of Banking Business in
Tanzania: Mzumbe Book Project , Morogoro.
Christian, C. (2009). Legal Aspect of Doing Business in Africa: Yorkville Law
Publishing,Toronto.
Jhingan M.L. (2004). Money, Banking, International trade and Public Finance
(6thedn): Vrinda publications Ltd: New Delhi, India.
Kothari, C.R (1999). Research Methodology: Methods & techniques, 2nd Ed: New
Delhi: New Age International (P) Limited Publisher.
Mark, H. (2011). Banking law: Lexis Nexis Publisher: Hong Kong
Mynen, S.R. (2008). Law of Banking (1st Ed), S. P. Gogia Publication: Hyderabad,
India .
Onalo,P. L(n.d).Land law and Conveyancing in Kenya: Law Africa Publishing,
Nairobi.
Rwegasira A. (2012). Land as a Human Right: Mkuki na Nyota Publisher, Dar es
Salaam
SH Goo, (2002). Land Law Hong Kong, (3rd Ed): LexisNexis Publisher, Hong Kong
Tenga, W. Sist, J. (2008). Manual on Land and Conveyancing in Tanzania: Law
Africa Publishing (T) ltd, Dar-es-Salaam.
Tenga W., Sist, J. (2015).Theoretical Foundations of Land Law in Tanzania: Law
Africa Publishing (T) Ltd ,Dar-es-Salaam.
Tom, O. (2008). Conveyancing Principle & Practice: Publish Law Africa, Nairobi –
Kenya.

Journal Articles
Abdelrahman E, SaaidA.(2015) The Regulatory and Supervision Framework of
Microfinance in Kenya:International Journal of Social Science Studies Vol.
3 No.5: SSN 2324-8033EISSN 2324-8041 URL: http://ijsss.redfame.com

84
Ernest B (2013),Assessment of the Acceptability of Personal Guarantees and Life
Assurance Policies as Collateral for Loans in Ghana. Research Journal of
Finance and Accounting Vol.4, No.12, SSN 2222-1697 (Paper) ISSN 2222-
2847.

Other Articles
Tanganyika Law society (2015), Ijue Sheria Ya Ardhi na Taratibu Zinazo husika
Kupata, Kumiliki Na Kuuza Ardhi Vijijini Na Mjini
Violet, A (2011) land law : Published by National Open University of Nigeria:
Abuja.

Reports and Dissertations

Bikki R, Joselito G.(2003) Microfinance Regulation in Tanzania: Implications for
Development and Performance of the Industry Africa Region Working Paper
Series No.51 Retrieved on 6th September 2015 from World Wide Web
https://www.google.com/search?q=Bikki+R%2C+Joselito+G.%282003%29+
Microfinance+Regulation+in+Tanzania%3A+Implications+for+Developmen
t+and+Performance+of+the+Industry+Africa+Region+Working+Paper+Seri
es+No.51++pp.+1-5&ie=utf-8&oe=utf-8&client=firefox-b
Fidelis, K. M. (2006). The Challenging Tanzanian Land Law Reform: A study of the
Implementation of the Village Land Act: Retrieved on 10th May 2015 from
WorldWideWebhttps://www.kth.se/polopoly_fs/1.158660!/Menu/general/col
umn-content/attachment/EX-06-160.pdfEX-06-160/2006.
Lusaga, J.M. (2006). Issuing Residential License to Landowners in Unplanned
Settlements in Dar es Salaam Tanzania: Report by Un-Habit, Shelter branch,
Land and Tenure. Retrieved on 7th December 2015 from
WorldWideWebhttp://www.tanzania.go.tz/egov_uploads/documents/RESIDE
NTIAL_LICENCES_PROJECT_DAR_ES_SALAAM_REPORT_sw.pdf
Mkwawa. E.P. (CEO Dar es Salaam community Bank Limited) Integrating
Financial Services into Poverty Reduction Strategies in Tanzania: Retrieved

85
 on 1st December 2016 World Wide Web
https://www.google.com/search?q=Mkwawa+E%2C+P+Chief+Executive+O
fficer+Dar+es+salaam+community+Bank+Limited+Integrating+Financial+S
ervices+Into+Poverty+Reduction+Strategies+In+Tanzania.&ie=utf-
8&oe=utf-8&client=firefox-b-ab.
Mwaisondola, G.N(2007).The modern law of mortgage in Tanzania ,the role of Land
Act,1999:School of Law the University of Birmingham. Retrieved on 2nd
March 2016 from World wide web
https://www.google.com/search?q=Mwaisondola%2C+G.N%282007%29.Th
e+modern+law+of+mortgage+in+Tanzania+%2Cthe+role+of+Land+Act%2
C1999%3ASchool+of+Law++the+University+of+Birmingham.+&ie=utf-
8&oe=utf-8&client=firefox-b.
Peter K. and Teresa P (2015) A new microfinance law for Tanzania. Retrieved on
22/1/2016 from www.clyde.com
OECD. (2013). OECD Investment Policy Reviews: Tanzania 2013: Overview of
progress and policy challenges in Tanzania. OECD Publishing. Retrieved on
June , 2015 from http://dx.doi.org/10.1787/9789264204348-6-en
Romanus S, (2009). Assessing the impact of Customary Land Rights Registration on
credit accessibly farmers in Tanzania. Romanus S. (2009).Assessing the impact of
Customary Land Rights Registration on credit accessibly farmers in Tanzania. Retrieved on
13th October 2015, from World Web Wide
https://www.google.com/search?q=Romanus+S%2C+%282009%29.+Assessing+the+impact
+of+Customary+Land+Rights+Registration+on+credit+accessibly+farmers+in+Tanzania.&i
e=utf-8&oe=utf-8&client=firefox-b
Sundet, Geir. (2005). The 1999 Land Act and Village Land Act: A Technical
Analysis of the Practical Implications of the Acts. Retrieved o 22nd June 2016
from World web wide
https://www.google.com/search?q=Sundet%2C+Geir.+2005.+The+1999+La
nd+Act+and+Village+Land+Act%3A+A+Technical+Analysis+of+the+Pract
ical+Implications+of+the+Acts.&ie=utf-8&oe=utf-8&client=firefox-b

86
Tanzania Property and Business Formalization Program. (2007 )Tanzania: Rural and
Micro financial Services Project. Project ID No.TZ-PE-50441, Report
No.PID 6672 Washington, D.C., May 15, 1998. Retrieved on 1st October
2015 from World Wide Web
https://www.google.com/search?q=Tanzania+Property+and+Business+Form
alization+Program%2C+2007+Tanzania%3A+Rural+and+Micro+financial+
Services+Project.+Project+ID+No.TZ-PE-
50441%2C+Report+No.PID+6672+Washington%2C+D.C.%2C+May+15%
2C+1998.&ie=utf-8&oe=utf-8&client=firefox-b
Us aid Country Profile: Property Rights And Resource Governance Us aid Country
Profile: Property Rights And Resource Governance. Retrieved on 11th
January 2016 from World Wide Web https://www.land-links.org/wp-
content/uploads/2016/09/USAID_Land_Tenure_Egypt_Profile-1.pdf

Article in News papers

Joseph. Z (2015) Njia ya kuwa fanya wakulima wakopesheke ni kuwa dhamini,
Mwananchi Newspaper retrieved on 27th August 2015, from
https://www.google.com/search?q=mwanachi+news+paper+link
Kenneth, M (2014) Hati za kimila; Mwananchi Newspaper on 16th November 2014
WorldWideWebhttp://www.ippmedia.com/frontend/index.php/.itm.c/2.au/articles10
7818/javascript/page_home.js?l=69252

Other source
http//www.castles.com/general.php?category=syndicates on 12/December 2015
http;//www.ippmedia.com/fronted/index.php Retrieved on 20/2/2016
http;www. mwananchi.co.tz/makala/njia-ya-kuwafanya-wakulima.2015.
http:// www.bussnessdictionary.com/definition/lockout-agreement.html,
http://www.inbreaf.co.uk/property-law/lock-out agreements.htm
htt://www.legal dictionary .the freedictionary.com./mortgage Retrieved on
115/08/2015

87
http://www.lexology.com/library/detail.aspx?g=78556dce-f307-4933-98do-
a4febo76c782
http;//www.World population with access to finance (http://worldbank.org
Retrieved on 16/12/2015

88
 APPENDIX
QUESTIONNAIRE

MZUMBE UNIVERSITY MAIN CAMPUS, as partial fulfillment of Masters in

Commercial Laws, do hereby require to conduct research and in that respect, I would
like to request you fill in the questionnaire on the topic “ACCESS TO LOANS IN
MICROFINANCE INSTITUTION BY USE OF UNSURVEYED LAND AS
SECURITY : ANALYSIS OF THE LAW AND PRACTICE IN TANZANIA
MAIN LAND”.

Please respond to all questions, even if you do not know precise information
requested.
Provide your best estimate.
Note that, any information you provide will be kept strictly confidential.
Name of the respondent.......................................................................
Place of work........................................................................................
Occupation............................................................................................
Gender...................................................................................................

QUESTIONS
1. Are you sufficiently experienced and knowledgeable about Microfinance
institutions in Tanzania?
a) YES b) NO ……………………

2 . Microfinance institutions are relevant in accepting un-surveyed land as security

for creation of mortgage in Tanzania.
a) YES b) NO ………………………….
If “no “why

89
If “yes” How
…………………………………………………………………………………………
…………………………………………………………………………………………
3. What services do they offer?
…………………………………………………………………………………………
…………………………………………………………………………………………
4. Is the credit facility asked by the borrower equivalent to unsurveyed land?
a) YES b) NO ……………………

5. What is the viability of unsurveyed land as security?

…………………………………………………………………………………………
…………………………………………………………………………………………
6. What are the legal requirements for credit facilities to be secured by unsurveyed
land?
…………………………………………………………………………………………
…………………………………………………………………………………………

7. Microfinance institutions are they protected by laws?

a) YES ………. b) NO…………..
How……………………………………………………………………………………
…………………………………………………………………………………………
8. Though Land does not depreciate, is it possible to purchase the unsurveyed land of
defaulter of credit facility?
a) YES b) NO ……………………
If “no “why
…………………………………………………………………………………………
…………………………………………………………………………………………
9. Is it easy to conduct search on unsurveyed land?
…………………………………………………………………………………………
…………………………………………………………………………………………

90
10. Is it easy to know the encumbrances on unsurveyed land?
…………………………………………………………………………………………
…………………………………………………………………………………………

11. How many of these applications succeeded in acquiring the loan? And what are
the reasons not giving the loans
…………………………………………………………………………………………
…………………………………………………………………………………………

12. What are the major constraints imposed by legal and regulatory frame work on
Microfinance institutions in Tanzania and is relevant?
…………………………………………………………………………………………
…………………………………………………………………………………………

13. What are the legal challenges facing un-surveyed land as a loan security?
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………

14. What are the improvements/recommendations to be adopted in promoting and

improving un-surveyed land as security?
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………

* Please explain where possible or where you think it necessary.

* Thanking you for your cooperation and be blessed*

91