BoT moves to boost credit growth

The Bank of Tanzania (BoT) has waived 80 per cent loan to deposit ratio restriction, a move aimed at enabling banks to extend more credit facilities to their clients. 

The BoT said the restriction was removed last year and banks allowed to lend without the previous ratio but control their liabilities versus assets.

The BoT Director of Banking Supervision, Mr Agapiti Kobelo, told ‘Daily News’ that instead of restriction banks are now closely monitored on a daily basis.

“The most important thing is to loan prudently,” Mr Kobelo said over the weekend, “while minimising risks and exposures.”

Under the old system, the banks had to deposit up to 20 per cent of their total deposits to the central bank and the funds remained locked for defaulting purpose.

BoT paid no interest on the deposited funds, while banks rewarded interest for every cent received in a way of deposits, thus increasing the costs of borrowing.

Mr Kobelo further said that despite making daily inspections of the banks, they also have to submit to BoT their monthly ‘market risk exposure report’ in the format prescribed by the central bank.

The central bank also increased the minimum core capital requirement ratio whereby for commercial and cooperative (nationwide) banks to rise by 200 per cent to 15bn/-, community banks 2.0bn/-, microfinance and cooperative (regional) banks 5.0bn/- and developing banks 50bn/-, while merchant banks is 25bn/-.

The Bank M Deputy Chief Executive Officer, Mr Jacqueline Woiso, said the move gave the bank more room to extend loans to reach over 90 per cent of deposits.

“The waiver helped us to extend more loans, but our NPLs (non performing loans) are one of the lowest in the market at 2.3 per cent,” Ms Woiso said.

To raise more fund, Bank M planned a right issue and senior debt in the second half of this year and expects to raise 30bn/-.

The BoT June Monthly Economic Review shows that interest rates on loans were somewhat mixed, with overall lending rate easing to 16.10 per cent from 16.22 per cent, while short-term lending rates (up to one year) edged up to 14.27 per cent from 13.68 per cent.

“As a result, the spread between 12-month deposit and lending rates widened to 3.61 percentage points from 3.23 percentage points in the preceding month,” the report shows.

Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania

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