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Tanzania: Banks Must Do More Despite Good Results
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The Citizen (Dar es Salaam)
EDITORIAL
7 August 2008
Posted to the web 7 August 2008
Commercial banks are currently lending more than ever done before, with the main beneficiaries being the productive sectors of the economy and individuals.
The new trend has been confirmed by the first independent review of the sector's performance undertaken by the international audit firm, Ernst &Young, covering last year.
The results of the survey were released last week at a function, where Bank of Tanzania Governor Benno Ndulu, whose institution has been underscoring the surge of availability of commercial banks credit, officiated.
According to the Tanzania Banking Sector 2007 Performance Review, the increase in lending is evident, in among other things, the level of interest income generated by the institutions.
It accounted for more than 70 per cent of their total income during the year, as the loans portfolio rose from about Sh77.5 trillion to nearly Sh95 trillion between 2006 and 2007.
The reports portray a healthy banking sector with huge growth prospects that the economy requires to fund national development efforts.
Until recently, commercial banks invested heavily in government securities, shunning lending to productive activities and provision of personal loans. With the Government doing away with domestic borrowing, many have been forced to change tack, leading to the average loan deposit ratio of most banks reaching a healthy 61 per cent.
However, despite the superb performance in terms of asset bases, profitability and earnings, the banking sector has yet to optimally serve the country.
Its shortcomings include the cost of borrowing mostly through high interest rates that averaged 16 per cent last year.
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Other challenges that should be promptly addressed include lack of access by the majority to banking services, high-risk premiums and unavailability of long-term financing. To serve more people, the banks should also increase specialisation in the industry through innovative products such as mortgage finance, which is currently quite limited in the market.
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