Tanzania Government in New Plan to Reduce Lending Rates, Boost Liquidity

Arusha — The government will meet with top executives of financial institutions for the purpose of reviewing the monetary policy. This is with the view of seeing how to further lower interest rates, a cabinet minister said yesterday.

Finance and Planning minister Mwigulu Nchemba told CRDB Bank Plc shareholders here yesterday that President Samia Suluhu Hassan wants to boost liquidity in the economy – and the best way to achieve this is by ensuring that interest rates go down for Tanzanians to afford loans.

“The President wants to see more money in circulation. My ministry and the Bank of Tanzania (BoT) will dialogue with financial institutions to identify areas that were discouraging people from going for bank loans. This is one way of boosting liquidity,” he said.

He was responding to a call by Arusha Urban lawmaker Mrisho Gambo who wanted the BoT to revisit its policies with a view to bringing interest rates down.

“If the Finance ministry can bring that in Parliament, we will support it because it is what Tanzanians need to prosper,” said Mr Gambo amid applause from over 700 CRDB Bank shareholders participating in a financial literacy seminar at the Arusha International Conference Centre (AICC) yesterday.

Mr Gambo posed a challenge to the BoT after the Deputy Governor (Financial Stability and Deepening), Dr Benard Kibesse, called upon banks to consider lowering their interest rates further in line with the aspirations of Tanzanians.

In the past few months, the commercial banks announced cutting their lending rates, particularly on personal loans. For instance, in June last year (2020), the CRDB Bank cut interest rates on loans to workers to 14 percent.

Prior to that, the bank had on May 11, 2018 cut its lending rate from 22 to 17 percent. A few days later, it cut the rate on personal loans to 16 percent – and, finally, cut it further to 14 percent.

Yesterday, Dr Nchemba said the government will look into all aspects that prevent the commercial banks from reducing their lending rates – and what can be done for the private sector to employ more Tanzanians.

“If, for instance, a corporate entity asks us to reduce corporate tax so that it employs say ten Tanzanians, we will not hesitate to do it,” he said.

Commercial banks, he said, must also look beyond Tanzania’s boundaries if they were to capitalize on the country’s reputable history in the independence struggles for a number of countries in Africa as well as its strategic logistical location.