BoT to launch credit reference databank in Sept

* Move seen reducing cost of commercial lending
* Invites companies to open credit reference agencies

BoT HQ in Dar
Bank of Tanzania said yesterday it plans to launch the country's first credit reference databank in September, in a move aimed at tackling high lending rates in east Africa's second biggest economy.

Tanzania's average deposit rate stood at 2.6 percent in October, up from 2.3 percent in September, while lending rates were at 14.9 percent, up from 14.8 percent a month earlier.

The central bank said it would administer the databank, while it would issue licences to private credit reference agencies. It invited companies last year to apply for licenses to set up credit reference bureaus.

The hope is that the pooling of credit information will reduce the risks of lending, and so bring down loan rates and increase the supply of credit to businesses to fuel growth.

"Borrowers may use their positive credit history as collateral to access loans at better rates and seek more competitive terms from different lending institutions," the Bank of Tanzania's deputy governor in charge of financial stability, Lila Mkila, said in a statement.

"Some credit reference bureau operators, including some renowned international credit bureaux, have shown interest and we expect to receive applications from some of them in the very near future," said Mkila.

Mkila said the database would be tested in June and was expected to go live in September.

The central bank said a credit reference bureau was required to have a minimum paid-up capital of 650m/- (US $407,000) to be eligible for a license.

"By addressing the problem of information asymmetries, the credit information sharing system is expected to promote increasing levels of trust between lenders and borrowers, resulting in an increased volume of credit in the economy."

Credit to the private sector grew at an annual rate of 31.9 percent in October compared to 20.3 percent a year ago.
Source: Reuters,af.reuters.com, reported by Fumbuka Ng'wanakilala in Dar es Salaam

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