WE’VE MONEY WITHIN REACH: BANK OF TANZANIA

Central Bank Governor, Prof Benno Ndulu

Central Bank has promised financial markets a hefty boost of up to 500bn/- effective next week following a reduction, by BoT, of the proportion of requisite rate of deposits by financial institutions from 10 to 8 per cent.

Initially, commercial banks were required to deposit 10 per cent of all deposits by customers with the central bank; the rate now goes down to to 8 per cent, which means each of the banks will get a two per cent refund from the funds it had earlier deposited at the BoT.

Central Bank Governor, Prof Benno Ndulu, explained yesterday that the decision was meant to upturn liquidity in the financial markets, given the fact that commercial banks control almost 75 per cent of all assets in the money market.

Analysts have welcomed the new move by the BoT, pointing out that it would play a crucial role in increasing credits to the private sector to stimulate the economy.

“There have been suggestions from some quarters that circulation of money has fallen, but the truth is many people are now conducting transactions electronically as opposed to cash payments,” the governor explained. He added; “Given the reduction on the rate we expect to dish out between 400bn/- and 500bn/- to banks by April 20, this year.”

Prof Ndulu was speaking during a panel discussion at the launch of the 9th Tanzania Economic Update by the World Bank which carried a theme; “Money within reach: Extending Financial Inclusion in Tanzania.”

However, Prof Ndulu warned financial institutions against non-performing loans (NPLs) which he said were on increase, even though he admitted that access to loans was still a challenge to small, medium and start-up enterprises.

During panel discussions, the Managing Partners at Rex Consulting Limited, Dr Hawa Sinare, tasked the BoT to control financial institutions on the cost of borrowing.

“Credit facilities are ‘very expensive and unfriendly’ to new business ventures; the government should come in and rescue the situation,” the senior legal practitioner recommended. A senior lecturer of economics at Mzumbe University, Prof Honest Ngowi, warned that using access to credit as ‘a carrot’ for formalisation would not bear required fruits.

“As a matter of fact, players in the informal sector are getting far more loans through informal sources than they are from financial institutions,” Prof Ngowi explained.

The don called for state intervention to check the high costs of borrowing, stating that Tanzanians were yet to benefit in real terms from over 52 banks currently operating across the country due to high lending interest rates.

The Managing Director of National Microfinance Bank (NMB), Ms Ineke Bussemaker, attributed the relatively higher lending interests rates to liquidity levels within the financial market.

Source: DailyNews