STATEMENT BY THE MINISTER FOR FINANCE OF
THE UNITED REPUBLIC OF TANZANIA,
HON. BASIL P. MRAMBA (MP) AT THE
LAUNCH OF THE TANZANIA BANKERS ASSOCIATION’S CREDIT INFORMATION BUREAU AND WEBSITE
Royal Palm Hotel, Dar es Salaam, 19 July 2004
The Chairman of Tanzania Bankers Association,
Governor of Bank of Tanzania,
IMF and World Bank Representatives,
Chief Executives of Banks and Financial Institutions,
Members of the Media,
Ladies and Gentlemen,
1.0Mr. Chairman, Allow me to begin by expressing my sincere appreciation for being accorded the honour of officiating at this important occasion marking the launch of Tanzania Bankers Association’s (TBA) Credit Information Bureau and Website. It is also my great pleasure to congratulate you, Mr. Chairman on behalf of the TBA, on having achieved this milestone in the banking industry in Tanzania. Poor credit information, and as a result low credit provision, has been a long outstanding issue that has contributed significantly to slowing down the efficacy of the financial intermediation in Tanzania, and by extension to stunting the growth of firms particularly in the category of micro, small and medium sized enterprises.
2.0Mr. Chairman, According to a recent report on Access to Credit by the TBA, in March 2003 total loans in the banking system amounted to approximately 36% of total deposits and at that time the pool of loanable funds was TShs 740 billion. That pool of loanable funds has grown to over a trillion now but the core challenges bankers say they face remain. Therefore, it is commendable that the banking industry itself has taken the initiative to establish the innovative infrastructure that should go a long way to increasing the bankers’ confidence in prospective borrowers, and enable banks to provide more credit whilst still maintaining the stability of the financial system.
3.0As some of you are aware, the financial sector reforms begun in 1991 after a spate of high levels of non-performing loans (about 65% of the entire portfolio) amongst other policy issues which put the financial system into a state of crisis.Guided by the recommendations of the Nyirabu Commission of 1988, the Government embarked on a series of reforms intended to re-introduce stability into the financial system. Indeed, it was under this programme that the Banking and Financial Institutions Act of 1991 was enacted, allowing for the introduction of private banks into the financial sector.
4.0As we reflect on the outcome of the first generation of financial sector reforms we note that they were largely successful; however, the banking sector remains challenged to broaden the coverage and depth of services offered. Accordingly, while we celebrate the achievement of this milestone, we also call on you to proactively and innovatively look into the financing strategies that will increase lending to the majority of Tanzanians, who are based in rural areas and involved in small scale activities.
5.0Mr. Chairman, You will recall that after our meeting in June 2004 on the Excess Liquidity in the Banking Sector, we committed to jointly investigating innovative possibilities of increasing access to credit and even established a Task Force towards that end. Nevertheless, we yearn to learn of the individual measures that each bank or financial institution is taking to embrace the challenge of reaching rural borrowers by repackaging existing financial products to suit their unique characteristics and requirements.
6.0Mr. Chairman, I understand that the Credit Information Bureau is ultimately intended to result in lowering the cost of credit, lowering lending rates and reducing borrowing transaction costs. This is not expected to undermine the profitability of banks and financial institutions. Beyond that, it is important that the major success indicator should be the number of smallholder farmers who are able to obtain credit from banks and to build long term credit relationships with their bankers. Thus the Credit Information Bureau cannot be limited in scope to urban areas or it will be deemed to have failed in its mission of broadening access to credit.
7.0Coupled with the Government’s credit guarantee scheme initiatives, which are also intended to help banks gain confidence in new borrowers by sharing the potential credit risk in the event of default, it is our expectation that the production capabilities inherent in the agricultural sector and small and medium sized enterprises will be unleashed. Thus our public-private partnership in tackling this challenge will help us achieve a growing economy and a healthier banking industry.
8.0Mr. Chairman, The Government also appreciates your efforts to launch a website as well, since this will enable more people to realize what credit facilities the banking sector has to offer and to de-mystify the process of obtaining the available credit for those who qualify. We applaud the incorporation of digital technology in financial intermediation in Tanzania and anticipate that more will be done to ensure that more on-line services can be availed to current and potential clients through your website.
9.0It is also noteworthy that the introduction of the website is in line with the implementation of the National Development Vision 2025 and the Information Technology Policy. On-line banking is another means of extending financial services outreach to remote rural areas at the cost of internet access and the effectiveness of this innovation has been proven in other developing countries. I congratulate TBA on making an important stride in this area.
10.0Mr. Chairman, Ladies and Gentlemen, with these remarks it is now my pleasure to declare that the TBA Credit Information Bureau and Website are officially launched.
11.0I thank you for your attention.
Hon. Basil P. Mramba
19 July 2004
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