The Government of the United Republic of Tanzania via Government Notice Number 141/2024 and through the Minister of State, Prime Minister’s Office, (Labour, Youth, Employment and Persons with Disability, introduced a new regulation with regard social security scheme i.e., (The Social Security (Use of Members Benefit Entitlements as Collateral for Home Mortgage) Regulations, 2024). The above-mentioned Regulations was officially introduced on the 08th of April 2024.
With the new Regulations, employees can use their social contributions as collateral to secure loans with the financial Institutions. Introduction of the above-mentioned regulation have significantly changed the previous practice which restricted the accessibility of funds only upon retirement let alone other benefits such as medical benefits, maternity, death etc. With the new regulation, members of the Social Security Schemes are encouraged to utilize their funds for
financial purposes.
The Regulations provides for among others, the following:
Purpose for the Regulations:
To allow members of Social Security Funds assign a portion of their benefits entitlements not exceeding 50% of their entitlements from the Fund to be used as a collateral for home mortgage granted or to be granted by a bank or financial institution for purposes of construction of a residential house on their immovable property which they legally own; purchase a residential house; and/or improve, alter or carry out repairs to their house.
Eligibility and Access to the benefit:
One must have contributed to the fund at least 180 months, shall be a Tanzanian and the collateral life span shall be within a member’s compulsory retirement age.
A member who has contributed to more than one fund and whose by their contributions in those schemes/funds does not qualify them to this benefit, the total of their contributions periods shall be done to qualify them to use their benefits for house mortgage, provided the totalization gives at least 180 months or more. The collateral shall cease upon cessation of membership of a member, for reasons as may be prescribed under the law. The house to be constructed or repaired shall be made the
first collateral to the secured mortgage.
Conditions for application and grant of the collateral:
Any institution willing to offer loans against social security collateral must obtain approval from the Division responsible for social security within the Ministry responsible for social security matters. The said application should be accompanied with documents, such as a copy of the company’s registration or incorporation documents, documents relating to operational activities, a copy of valid business license, a copy of certificate of registration from the Bank of Tanzania and the current audited financial statements.
Default and Recovery:
The enforcement of collateral against the member’s scheme shall only be enforced in cases of default where the institution has provided adequate evidence that all recovery means, including the use of the first collateral subject to the terms of the agreement, have been thoroughly and reasonably exhausted.
The Fund shall not initiate/commence the payment to the Financial Institution unless it has obtained an approval/consent from the member.
Dispute Resolution:
Disputes between Members and Financial Institution will be mediated by the responsible Fund, while Dispute between Financial Institution and Funds will be mediated by the established Division.
Implications to Employers:
This impliedly continues to reinforce the Employer’s responsibility to register their Employees to the fund, timely accurate remittance of the funds, proper record keeping of their Employees.