Tanzania Government Wants Greater Role for Local Banks in Mega Projects

Dar es Salaam — The government said yesterday it wants greater involvement of local financial institutions in major infrastructure development projects in the country.

Finance and Planning minister Philip Mpango said the government will sign an agreement with local and international lenders before the end of next month for a $1.46 billion (about Sh3.35 trillion) financing arrangement for the Morogoro-Makutupora-Singida section of the standard gauge railway (SGR) project.

"Some banks have shown their willingness to lend to us. We expect to sign a $1.46 billion loan facility for financing the Morogoro-Makutupora-Singida section of the SGR project before December 17," Dr Mpango said during the 19th financial institutions meeting coordinated by the Bank of Tanzania (BoT) and Tanzania Bankers Association (TBA).

The SGR, the $2.95 billion (Sh6.6 trillion) Rufiji Hydroelectric Dam and revival of Air Tanzania Company Limited (ATCL) are some of the mega projects the government is currently undertaking in its endeavour to build the foundation for an industrialised economy.

In April, this year, CRDB Bank Plc and United Bank for Africa (Tanzania) provided $737.5 million in guarantees to the joint venture comprising Egyptian firms Arab Contractors and Elsewedy Electric for the execution of the Rufiji Hydroelectric Dam project.

Turkish firm Yapi Merkezi is currently building the 300 kilometres of the first phase of the SGR project between Dar es Salaam and Morogoro at the cost of Sh2.7 trillion.

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Work on the 422km section inking Morogoro, Makutopora in Dodoma and Manyoni in Singida Region began in February, last year, and is expected to be completed within 36 months at the cost of Sh4.4 trillion.

Dr Mpango said the government's strategic projects required a substantial sum to be sourced both locally and internationally.

"This meeting should be used as a platform to discuss how financial institutions can help finance both strategic and public-private partnership (PPP) projects," he said, adding that banks had a pivotal role to play in Tanzania's endeavour to transform into a semi-industrialised middle-income economy by 2025

Dr Mpango added that credit from financial institutions was vital for investing in infrastructure and development of the manufacturing sector.

He also urged the banking industry to discuss how it can cut interest rates on personal loans to attract more borrowers.

Sixty-six per cent of Tanzanians live in rural areas and depend on agriculture, but the majority of them either cannot access or afford loans, Dr Mpango said.

"The agriculture sector has been receiving less than five per cent of all loans issued by banks in the country. This is unacceptable."

BoT governor Florens Luoga said interest rates on loans have decreased to an average of 17 per cent. The financial sector has been growing at 3.1 per cent, with its contribution to the economy standing at 2.6 per cent in the last five years.

Prof Luoga said there are currently 61 commercial banks and financial institutions with 838 branches countrywide.

"BoT has been advocating bringing services closer to the people. As I speak, there are 22,481 bank agents in the country," he said.

TBA chairman Abdulmajid Nsekela said financial institutions, the government and other stakeholders should join hands in tackling challenges the sector was grappling with.

"Without a strong financial sector, we will face difficulties in realising the industrialised economy dream," said Mr Nsekela, who is also CRDB Bank managing director.

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