Money markets lift interest rates

Tanzania’s investors in money markets for the first time, since liberation of the financial industry, have a wider option of where to put their money due to lucrative interest rates offered at the moment.

This comes after the Bank of Tanzania (BoT) tight money on circulation to curb inflation and tame the shilling’s free fall last October, hence pushing up interest rates for banks’ deposits and treasury bills.

The Tanzania Securities Chief Executive Officer, Mr Moremi Marwa, told the ‘Daily News’ in an interview that at the other hand, almost all stocks are receiving good dividend yields of above 10 per cent.

“Investors have a wide option at where to invest as returns rates are excellent,” Mr Marwa said on Monday, adding “because banks, BoT and equities are competing for funds.”

He added that the banks’ deposit rates are at all time high at 8.3 per cent on average, T-bills rates are between 15 and 18 per cent and equity yields are above 10 per cent.

“This is good for investors as banks and equities are competing on funds,” he said.

However, the CEO of the stock brokerage firm said in real sense individuals are not getting the said deposits interest rates and in most cases they are ending to get around 5 per cent.

“Those with huge funds are the ones who benefit most from the said banks’ interest rates the like of pension funds and fund managers, some ending negotiating a better deal of up to 18 per cent,” Mr Marwa said.

Analysis of listed companies at Dar es Salaam Stock Exchange, with exceptional of NMB, CRDB and TOL, shows that they are offering better yield return per stock of above 10 per cent per year, thus increase the wider choice of investments in money markets.

“The issue here,” Mr Marwa said, “is that banks’ offers have a short term nature while equities are meant for long term investment with good returns.”

CRDB Bank Managing Director Dr Charles Kimei told the ‘Daily News’ previously that commercial banks had limited options in mobilising deposits.

“Inflation is affecting savings mobilisation to force banks to increase interest rates, we (CRDB) at the moment are not figuring to increase lending rates but if situation stay the same we have little choice,” Dr Kimei said.

The Monthly Economic Review of April, this year issued by BoT shows during March, most money market rates exhibited an increasing pattern when compared with the preceding month.

“(This) is in line with adoption of a tight monetary policy stance by the bank in an effort to curb inflation during the review period,” the Review indicates.   

During the month, the overall interbank cash market rate rose sharply to 16.84 per cent from 1.86 per cent in March, 2011.

Source: The Daily News,http://www.dailynews.co.tz, reported by Abduel Elinaza

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