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Tanzania: Financial Inclusion Will Boost Economic GrowthWednesday, July 02, 2014 > 08:46:56
INDUSTRY and Trade Minister Dr Abdallah Kigoda, has rightly urged commercial banks and other financial institutions to review lending interest rates to stimulate higher economic growth in the country.
Dr Kigoda made the call while officiating at the Manyara Region Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) Annual General Meeting in Babati over the weekend. TCIAA is a Non-Governmental Organisation (NGO) whose main objective is to safeguard and promote interests of entrepreneurs in commerce, industry and agriculture.
Its functions includes serving and supporting business community in all districts and regions in Tanzania, where it stimulates commercial, industrial and agricultural growth.
The organisation honours and acknowledges new business developments, mediates in commercial disputes, disseminate business information, promotes local businesses, plans events and fund raising activities.
In his speech, the minister did not mince words by pointing out that the bankers in the country were not friendly to entrepreneurs, particularly those who are in their infancy.
Small and medium enterprises (SMEs) in many cases fear to approach banks because of prohibitive borrowing terms that can easily lead them into bankruptcy or destitution for failure to repay loans.
The Bank of Tanzania (BoT) has repeatedly showed slow growth or stagnation of credit growth in the country, especially in extension of credit facilities to the private sector. In its May 2014 report, the Central Bank states that interest rates on lending for the year that ended in April, were between 15.03 per cent and 17.38 per cent, while deposits were around 8.6 per cent.
However, on the ground there are cases where lending rates are as high as 25 per cent and deposits are as low as 5 per cent. Despite the fact that the principal role of banks is to facilitate efficient allocation of resources in the economy, in Tanzania the institutions have always given priority to the government.
According to official records there are more than 50 banks and over 100 non-bank financial institutions currently operating in the country, but most of them focus on investing in government securities such as treasury bills and bonds.