PRESIDENT John Magufuli has called on banks in the country to lower interest rate to encourage Tanzanians to borrow so as to boost their economic activities which will stimulate growth and development.
He said in Mtwara on Saturday that banks should look at the possibilities of cutting lending rate to encourage many Tanzanians to borrow and expand the loans portfolio which is the core essence of banking. "I am asking the banks to explore possibilities of lowering interest rates.
When you cut your rates many Tanzanians will be encouraged to borrow and you increase your profitability," he said during the launch of NMB Bank's Business Centre in Mtwara. Bank lending rate in Tanzania increased to 12.25 per cent in October from 11.57 per cent in September of 2016.
It averaged 12.32 per cent from 2003 until 2016, reaching an all time high of 15.13 per cent in March of 2013 and a record low of 7.53 per cent in March of 2004. Lower interest rates make it cheaper to borrow which tends to encourage spending and investment which means more local businesses will thrive thus more jobs will be created, he said.
He called on the banks to focus on lending to the needy instead of concentrating in buying government securities.
"I am asking the banks to focus more on trading with the people in providing more affordable loans instead of trading with the government through securities," he said. President Magufuli said he preferred fewer banks that perform well and provide affordable loans than a multitude of banks which do not help the people.
"In banks it is better we have even three banks only which perform well instead of having a multitude of banks. The issue here is not about having many banks rather is to have banks which provide affordable loans, follow rules and regulations and are closer to the low income earners," he said.
He directed on the government leaders including district commissioners to channel government funds through NMB where government owns 32 per cent stake. "I should ask the minister, because you are the one who manages government finances, issue instructions that government funds should be channelled through NMB so that I get more dividend."
"Those who do business without benefiting the government and share profit on themselves, we are not going to do business with them." NMB is the most profitable bank in Tanzania in terms of 2015 results. It has assets worth Tsh4.5 trillion ($2 billion) giving it a market share of 17 per cent in 2015 and ranking it as the second largest bank.
It leads others both in customer base and branch network. With over 2 million customers, over 175 branches and over 600 ATM’s, NMB has a footprint in more than 95 per cent of Tanzania's districts. The government also has 30 per cent stake to NBC Limited.
Earlier, the Minister for Finance and Economy, Dr Philip Mpango, said the government has no plans to sell its stake at the bank due to its profitability trend which makes it a good example of successful privatization policy in the banking sector.
He said the government owns 32 per cent stake at the bank worth 430bn/- which has increased ten folds since it was privatized in 2005. The government has been receiving its share of dividend every year where in 2016 the government earned 16.5bn/- up from 7.9bn/- in 2010.
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