In Summary
BoT deputy governor (financial stability and deepening) Bernard
Kibesse said in Dodoma on Wednesday that Tanzania had opted for a policy as it
studied how other countries in the region were handling the matter.
Dodoma. The Bank of Tanzania (BoT) is finalising a policy on
interest rate caps, The Citizen has learnt. It is part of efforts by the
government reduce the cost of credit, which is said to be prohibitively high
for many Tanzanians.
BoT deputy
governor (financial stability and deepening) Bernard Kibesse said in Dodoma on
Wednesday that Tanzania had opted for a policy as it studied how other
countries in the region were handling the matter.
“The relevant
policy will be ready by March, 2018,” he said on the sidelines of the official
opening by President John Magufuli of CRDB Bank’s main branch in Dodoma.
Speaking during
the event, President Magufuli reiterated his call to commercial banks to lower
their lending rates, saying the government was strengthening credit reference
systems as a way of reducing non-performing loans (NPLs) in the banking system.
“That is why I
want BoT to come up with a policy that will ensure uniformity of lending rates
across financial institutions. We cannot build an industrialised nation with a
system whereby each bank charges its own rates,” he said.
Tanzania’s financial system has grown from only three commercial banks in the
1990s to 58 currently.
However, the
number has not helped to reduce the cost of borrowing. BoT figures show that as
of September 2017, the average lending rate among commercial banks stood at 18
per cent against an average deposit rate of 9.8 per cent.
It was against
the backdrop of exorbitant lending rates that neighbouring Kenya adopted legislation
[the Banking (Amendment) Act, 2016] in September, last year, imposing limits on
lending and deposit rates amid fierce opposition from bankers.
A year later
(September 2017), however, Central Bank of Kenya (CBK) governor Patrick Njoroge
hinted at the possibility of the law being repealed on the grounds it had
adverse effects on the economy.
The effects
include a slowdown in credit to the private sector after commercial opted to
pump money into treasury bills that offer risk-free returns. Banks perceived
the private sector – mostly small and medium-sized enterprises, low-income
borrowers and first-time borrowers – as too risky.
But Dr Kibesse
was quick to point out that Tanzania would not immediately go the Kenya way and
would first analyse how Kenya had been affected and how a similar approach was
being applied in South Africa.
“We have
important lessons from Kenya and South Africa,” he said.
Analysts are of
the view that the government has learnt a lot from other countries and that any
policy will be based on this fact.
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