Mramba: bank loans to local business unimpressive

THE minister for industry, trade & marketing, Basil
Mramba, has said the banks in Tanzania are rather unique
in that they make handsome profits without doing much
by way of lending to local business.
Mramba said this during the opening of a trainingof-
trainers workshop held in Dar es Salaam on Monday
this week that focused on liking banks to small
and medium enterprises (SMEs).
Noting that “it was easier to borrow from abroad than
from within Tanzania” – the latter ostensibly blamed on
inadequacies in the extant legal framework – the minister
said all that had now been corrected. But there still appears
to be no improvement in the lending climate in the
country – with a huge gap between lending and deposit
rates still a spectre!. According to Mramba,
“a few small banks have shown a lot of interest in
lending to small enterprises; but they lack adequate
capital. Banks such as these could be encouraged through
a programme that links them through various policies and
institutional reforms – as is the case in some Asian
countries.” The minister noted that the Government should take the lead in formulating and enunciating such policies
by, for example, “subsidizing banks interest rates, or
their outreach costs.” In particular, he went
on, SIDO and the banks could share costs through
the Government Budget as part of the linkages. Such
an arrangement should simultaneously improve the
capacities of small scale owner-operated financial
intermediaries at the grassroots level – including empowering
district authorities to oversee and guide grassroots
financial intermediaries such as SACCOS and
other self-help groups. At present, district authorities
are involved only as political mobilisers for an
undertaking which is more complex than is generally
realized. In that regard, the minister urged Governments in
African countries, Tanzania specifically included, to
involve themselves in the development of the SMEs
sector in their countries for a more meaningful and sustainable
socio-economic development. No doubt Small and
Medium Enterprises were a credible and creditable
means of promoting employment, income generation
and economic growth, Mramba said. “There is widespread
recognition that SMEs can make a vital contribution to
job creation, income generation and export growth”, he
stressed. Mramba also said that SMEs increased business
opportunities for women and the youth, thereby ensuring
a more equitable distribution of wealth.
After recognizing the role of SMEs in the social
and economic development of the country, Tanzania
formulated a specific policy in 2003 with the intention
of creating an environment that would facilitate growth
of such enterprises. According to the minister,
some areas that were addressed by that policy
were the legal and regulatory frameworks, as well as
strengthening business development services, including
access to markets and technology development.
Others are access to information; entrepreneurship
and business skills development, and improving access
to finance. The Government also
established the National Micro- Finance Policy in line
with the objective of further supporting the SMEs sector.
The policy established a framework within which
micro-finance operations would develop. It also laid
out legal and institutional principles that would guide
operations of the system, and provided a guide for coordinated interventions by respective participants.
Other recent initiatives taken to facilitate the growth
of SMEs include the creation of a credit guarantee scheme
for SMEs; as well as the establishment of special funds
– such as the National Entrepreneurship Development
Fund (NEDF) administered by SIDO, and the J K Fund
whereby selected commercial banks lend to savings
and credit cooperative societies (SACCOSes) under
Government guarantee. Despite these initiatives,
access to finance by Micro, Small and Medium Enterprises
(MSMEs) remains a serious challenge. The financial products available are very limited, and coverage
is mostly concentrated in urban centres.
Mramba said the financial institutions in Tanzania
continued to believe that SMEs are high risk borrowers,
and that processing and managing small loans is
overly costly and unattractive. Furthermore, the financial
service providers lack the delivery network and
skills required for successful SME financing operations.
Even micro-finance NGOs are limited in terms of their
volume of activity, range of products and outreach, and
most of the financial cooperatives (SACCOSes) are
operationally weak. He further noted that
there was thus a large unmet demand for financial services
for SMEs. A recent survey of over 2,000 enterprises in
Tanzania sponsored by the Financial Deepening Trust
indicated that only three per cent of the enterprises managed
to access funds from financial institutions.
He said this was a dangerous way of promoting
sustainable savings and credit activities among the
targeted, usually semi-literate, groups.
He expressed the hope that Tanzanians and other
participants would learn from this particular Workshop
on how these things were done in Asia, especially
India, and propose concrete actions to be adopted by the
Government in Dar. The minister thanked
those who facilitated the Workshop, namely, Technonet
Africa, the UNDP, JICA and SIDO (Tanzania’s
Small Industries Development Organization).
He also publicly appreciated “those who were
involved in supporting this commendable initiative,
including TechnoNet Asia who provided consultants
for the Workshop. For his part, the Industrial
Policy Development Officer for TechnoNet-Africa,
Nokwazi Moyo, said by the end of the national training
programme in all the seven member countries, an additional
270 trainers would have been created to impart
skills in entrepreneurship development.
TechnoNet-Africa was launched by UNDP and its
partners in Johannesburg, South Africa, in June 2004
as a programme to promote small and medium enterprises.
It is geared to be the premier SME network in
Africa, with a focus on Food Processing, Agro-Based Industries and Metallurgical/ Engineering Industries.


SOURCE: BUSINESS TIMES