BoT discourages cash economy

Dr Masawe delivering a speech
The Bank of Tanzania (BoT) has said narrow financial structure in the economy is one of the major reasons for a huge amount of money being transacted in the informal sector, hindering smooth implementation of the monetary policy.

The Central Bank Director of Economic Research and Policy, Dr Joseph  Masawe, said in an interview over the weekend that the cash budget economy also contributes greatly to massive money transactions in the  informal sector.

"The huge amount of money transacted informally is an obstacle to the Bank's efforts to implement monetary policy, an important instrument in curbing inflation," he said.

Statistics show that 75 per cent of money in the market circulates in an informal system thus calling for concerted efforts in promoting use of formal financial system to rectify the situation.

Dr Massawe, however said, increased use of mobile financial services has been a good tool for formalising money transactions without involving  individuals directly who use the system. The recent BoT figures show that more than 800bn/- was being transacted through mobile financial services.

Likewise, he said there is need to promote formal financial services like use of cheque and credit cards to reduce the informal money transactions in the economy. Apart from promoting use of financial services, also increased use of savings could facilitate in rectifying the situation.

 Also he called for the need to deepen financial services in rural areas. Commercial banks have denied that mobile phone financial services are a threat but they are actually complementing banking business.

The combined customers of all 45 banks in the country are less than one-third of all subscribers of mobile phone companies -- Vodacom, Zantel, Airtel and Tigo --which offer financial services. Through mobile phones, the country can easily formalise the financial system.

Likewise, most people prefer mobile financial services over commercial banks because of efficiency, reliability and convenience. They challenged commercial banks to improve their services especially the Automated Teller Machines (ATMS).
Source: The Daily News,www.dailynews.co.tz, reported by Sebastian Mrindoko

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