{"id":40384,"date":"2021-11-07T16:51:27","date_gmt":"2021-11-07T16:51:27","guid":{"rendered":"https:\/\/www.africa-press.net\/tanzania\/?p=40384"},"modified":"2021-11-07T15:44:38","modified_gmt":"2021-11-07T15:44:38","slug":"high-borrowing-costs-stir-huge-debate-in-tanzania","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/tanzania\/all-news\/high-borrowing-costs-stir-huge-debate-in-tanzania","title":{"rendered":"High borrowing costs stir huge debate in Tanzania"},"content":{"rendered":"

Africa-Press – Tanzania. <\/strong><\/span>Dar es Salaam.<\/b><\/p>\n

High borrowing rates in the banking industry have ignited a huge debate with some questions whether recent fiscal measures by the central bank had improved liquidity and reduction of cost of loans.<\/p>\n

The debate was revived this week when Vunjo MP Charles Kimei remarked in Parliament that the \u201cgood monetary policy measures\u201d had not brought about the desired outcomes, that is, to bring down the interest rates.<\/p>\n

In July, this year, the Bank of Tanzania in July introduced some policy measures that laid a solid framework to increase liquidity and reduce the cost of lending to the private sector.<\/p>\n

The BoT also said would introduce a Sh1 trillion special loan fund for banks and other financial institutions to access money for lending to the private sector.<\/p>\n

The central bank also reduced the amount required to be reserved at the BoT, equivalent to the amount of loans extended to agriculture, as a way of increasing agriculture financing at lower interest.<\/p>\n

However, Dr Kimei, who is the former CEO of CRDB Bank, said \u201cthe banks have just increased their profitability for the benefit of their shareholders instead of relieving the borrowers.\u201d<\/p>\n

\u201cThere are problems with the monetary policy measures introduced by the Bank of Tanzania to improve liquidity and lower interest rates because they have not yet yielded,\u201d he said.<\/p>\n

\u201cI can tell you, the extra liquidity obtained by banks after the measures went to the government securities,\u201d he said.<\/p>\n

According to him, the central bank should now lower the returns of the Treasury Bonds and Bills which are usually used as benchmark due to the fact that the government securities are risk-free.<\/p>\n

\u201cIf the central bank is auctioning the risk-free government securities at, say 16 percent, which bank will charge lower than that. I can swear, interests cannot lower that way. We need to change the system by announcing lower rates in the government securities,\u201d he said.<\/p>\n

According to the BoT, overall lending rates averaged 16.55 percent in September this year, compared with 16.75 percent in August and 16.57 percent in July.<\/p>\n

However, the chairman of the Tanzania Bankers Association, Mr Abdulmajid Nsekela, told The Citizen that there were commercial banks that offered as low as 10 percent borrowing rates.<\/p>\n

\u201cAll I can say is that the banks\u2019 interest rates have continued to drop from 18 percent to 14 percent and there are some banks which have already declared to offer as low as 10 percent,\u201d he said.<\/p>\n

He added that banks were working on the interest rates after the central bank improvement measures which he described as stimulus package in agriculture. \u201cThe efforts to lower interest rates are continuous and sustainable,\u201d he said.<\/p>\n

Commenting on the debate, Equity Bank executive director Esther Kitoka said \u201cthe current initiatives taken have not improved liquidity but rather improved capital position which is good.\u201d<\/p>\n

However, she said, the liquidity still sits with big banks.<\/p>\n

\u201cThis has resulted into a squeezed liquidity position in that market that creates stress to small and medium size banks,\u201d she said.<\/p>\n

She said the government needs to allow for all players to get a share in public funds which will in the end have a multiplier effect on the economy.<\/p>\n

\u201cBig banks are not the preferred choice to all customers.\u201d<\/p>\n

\u201cWe need to allow growth of other banks which can also expand their network to reach more people and improve quality of service across. GEPG (Government electronic payment gateway) payments are channeled through the same big banks which limit customer\u2019s convenience in making such payments and skew liquidity again to few banks,\u201d she said.<\/p>\n

\u201cThe sector is not healthy due to concentration in few banks as compared to Kenya where banks are spread out in terms of their market share,\u201d she said.<\/p>\n

The Bank of Tanzania could not immediately comment on the debate.<\/p>\n

For More News And Analysis About Tanzania<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Tanzania. Dar es Salaam. High borrowing rates in the banking industry have ignited a huge debate with some questions whether recent fiscal measures by the central bank had improved liquidity and reduction of cost of loans. The debate was revived this week when Vunjo MP Charles Kimei remarked in Parliament that the \u201cgood […]<\/p>\n","protected":false},"author":84,"featured_media":40383,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,8,16],"tags":[6990,6991,711],"class_list":["post-40384","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","category-twitter","tag-africa-press-2","tag-africa-press-tanzania","tag-tanzania"],"yoast_head":"\nHigh borrowing costs stir huge debate in Tanzania - Tanzania<\/title>\n<meta name=\"description\" content=\"Dar es Salaam. 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