The Citizen (Dar es Salaam)
Zephania Ubwani
6 November 2008
Arusha — President Jakaya Kikwete yesterday challenged financial experts to address the problem of bank loans which, he said, were too costly for the majority of Tanzanians.
He also urged them to seek ways to expand the banking services which, he added, were still unsatisfactory even by sub-Saharan Africa standards.
President Kikwete said when opening the 14th Conference of Financial Institutions that credit was an important factor for investment and growth, but it was still too costly in Tanzania "and, therefore, not within the reach of the majority of Tanzanians".
He partly attributed the situation to extremely high risk premiums that banks placed on potential borrowers and insufficient competition in the sector.
He told experts drawn from banks and other financial institutions that the Government had over the past 10 years substantially reduced its share of the total domestic credit and was therefore much less of a problem in terms of crowding out the private sector.
"Unfortunately, most of the credit released tends to sit in the banks as excess liquidity instead of being lent out. As a result, the cost of credit made available to the private sector has to be borne by the small part that is lent."
On accessibility to bank services, the President said Tanzania ranked low, adding that only about five per cent of the country's population had bank accounts in 2004 compared to the sub-Saharan average of 26.8 per cent.
The 2001 Household Budget Survey showed that the average distance to a bank in 15 of the 21 regions in Tanzania Mainland exceeded 25 kilometres, he pointed out.
Most affected by poor accessibility to banking services are the rural dwellers who depend on agriculture for their livelihood and often face constraints in securing inputs and other resources.
"It is therefore important that we enable rural Tanzanians to have access to credit to enable them overcome the constraints," he told the two-day meeting organised by the Bank of Tanzania at the Arusha International Conference Centre (AICC).
The Government recently announced plans to open a window at the Tanzania Investment Bank (TIB) to channel credit to agriculture as a first step towards establishing a national agricultural bank.
President Kikwete urged the relevant bodies to speed up the commencement of the credit scheme, saying it would make sure that credit would reach as many Tanzanians as possible.
Banks and other financial institutions could also be helpful in supporting value addition to agricultural commodities, the President explained, citing the outgrower schemes in Morogoro Region involved in the production of sugarcane, tea and fruits.
"The setting up of TIB as the national development financial institution will strengthen the provision of long-term financing for growth thus enhancing projects in agriculture, manufacturing, tourism and others sectors as well as provision of venture capital," he added.
On the current global financial crisis, President Kikwete reiterated his assurance that Tanzania may not be severely affected by the recession that has hit the developed economies.
"Our financial sector remains safe and that systematic steps are being taken to minimise our exposure to risk by transferring our official reserves to safe hands."
The theme of the conference is "Second Generation of Financial Sector Reforms". BoT governor Benno said the first generation reforms included the Banking and Financial Institutions Act 1991 and the BoT
Act 1995.
These led to, among other things, the opening up of banking services to the private sector, both local and foreign. The number of banks in Tanzania has since grown to 35 at present from three, which were state- owned in the early 1990s.
Meanwhile, President Kikwete has assured the International Monetary Fund (IMF) that Tanzania will not backtrack on its economic policies.
He made the assurance here when he met the IMF Director for Africa, Antoinette Sayeh, on the sidelines of the 14th Financial Institution Conference, which he opened yesterday at the AICC.
He told the IMF director that the current clamour for a reversal of the economic changes adopted by the country several years ago was coming from politicians, and not the people.
"We all lived through the old economic system and we know how we suffered. The current disagreement on the economic transformations is mainly the work of politicians who want us to believe that they have forgotten the hard times," said Mr Kikwete.
However, the President vowed that the political disagreement over the economic changes adopted and implemented by the Government would not deter his administration as the changes have improved the economic situation of the country.
"We will never turn back we will never go back to the system where the state controls the economy," he insisted in the discussions also attended by Finance and Economic Affairs minister Mustafa Mkulo, Treasury permanent secretary Gray Mgonja and BoT governor Benno Ndulu and his deputies Enos Bukuku, Juma Reli and Lilla Mkila.
President Kikwete also briefed the IMF director on steps taken by the Government to deal with those involved in the EPA scam.
"We have done everything we could in dealing with EPA. It should be taken into account that the debts date back to more than 30 years ago. We are now letting the law take its course. We have learnt a lesson as far as our control mechanisms are concerned," he said.
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