Tanzania: Lending rates expected to decrease by 10-15pc

Dar es Salaam. Lending interest rates, offered by commercial banks in the country will drop range between 10 and 15 per cent when the Credit Reference Bureau (CRB) comes operational before the end of this year, the Bank of Tanzania (BoT) governor has said.

Prof Benno Ndulu said in an interview with a local television station on Monday that the bank is in final stages of setting up by the bureau, noting that ‘decent’ debtors will see interest on their loans dropping to not more than 15 per cent.Currently, commercial banks in Tanzania charge lending interest rates of between 14 and 24 per cent.

“The basic thrust of the strategy is to reduce the uncertainty banks have on whether or not somebody applying for a loan is going to repay once given a loan. When a bank has information on the track record of the loan applicant in repaying their debts it helps in the decision to lend and at reasonable cost,” Prof Ndulu told The Citizen in an electronic mail (e-mail) interview.

He told The Citizen that the BoT has finished all the necessary steps into the setting up of the CRB.“We have finished issuing regulations for those interested to operate such bureaus; invited interested parties to apply for licences to operate the bureaus; we are also finalizing our own (BoT’s own) process for setting up data collection on credit issued by commercial banks and repayment track record for each of their clients who has borrowed from them,” he said.

Under the new system, he said, BoT will start monitoring customer habits in payment of other bills including electricity and water. This will help the central bank to have a record of customers who are fond of defaulting and those who have clean records.

“Having identified those who are fond of defaulting and those who have clean records...we will be able to know who deserve to be sidelined when it comes to offering bank loans instead of punishing some innocent borrowers,” he said.

It is only about four million of Tanzanians who have access to loans provided by banks and non-banking financial institutions (NBFIs) operating in Tanzania, available data shows. Despite having access to the loans, customers have been complaining that interest rates offered by commercial banks in Tanzania are too expensive to help them achieve meaningful economic development changes.

This is despite the fact that with over 42 banks and non-banking financial institutions, Tanzania has one of the highest lenders in the region.The banks include CRDB Bank, National Microfinance Bank (NMB), National Bank of Commerce (NBC), Standard Chartered, Citibank, Barclays, Stanbic and Exim.

Others are FBME, Access Bank, Akiba Commercial Bank, Azania, BancABC, Bank M, Bank of Africa, Bank of India, Commercial Bank of Africa and Diamond Trust. The category also include Ecobank, Habib, I&M, International Commercial Bank, NIC Bank, People’s Bank of Zanzibar and the United Bank of Africa.

Banks, categorised in the Regional and Small bank’s class include Dar es Salaam Community Bank, Efatha, Kagera, Kilimanjaro Co-operative Bank, Mbinga, Mkombozi, Mufindi, Mwanga, Tandahimba Community Bank, Tanzania Women Bank, Uchumi and Njombe Community Bank.

Institutions classified as Non Bank Financial Institutions include Tanzania Investment Bank, Tanzania Postal Bank and Twiga Bancorp.