More sweet deals as lenders lower interest rates

Dar es Salaam. Banking consumers are increasingly getting spoiled for choice as more and more banks are rolling out loan packages with lower interest rates and more lenient pay back requirements.

The NMB Bank Plc has become the latest lender to lower lending rates and extend loan repayment time, in a series of actions by commercial banks that seem to be aimed at attracting customers and easing the non-performing loans portfolio.

NMB managing director Ineke Bussemaker told reporters yesterday that the bank’s loan interest rates for salaried workers have been reduced from 19 per cent to 17 per cent to meet “customers’ demands for cheaper loans.”

The bank has also extended the repayment period from a maximum of five years to six years.

“For a long time, customers have been asking for a reduction of interest rates and extending time for loan repayment. We are responding to their needs,” Ms Bussemaker noted.

NMB joins a host of other commercial banks in revising downwards the interest rates as part of what some analysts say is an innovative way to attract and retain customers in an increasingly competitive banking industry characterised by both tight liquidity in the market and an increase in non-performing loans.

Other banks that have announced a reduction in loan interest rates are BancABC, Ecobank, PBZ, NBC and CRDB.

In addition to responding to customers’ demands, Ms Bussemaker said the bank had reduced interest rates to also compete with other banks in the market.

The reduction in interest rates by commercial banks had been anticipated since the Bank of Tanzania started taking policy measures to ease liquidity early last year.

In March 2017, the BoT cut its discount rate to 12 per cent from 16 per cent to help spur lending and boost economic growth. It was the first time since 2013 that the BoT was lowering its rate.

Again in August of the same year, the BoT lowered the discount rate to an all-time low of 9 per cent. The discount rate is applicable to banks borrowing from the central bank as a lender of last resort and in the Treasury securities (government papers).

Meanwhile, NMB’s Assistant Director for Loan Repayment, Mr Phidelis Joseph, said NMB and the Higher Education Students’ Loan Board had entered an agreement that will enable the bank to restructure its customers’ HESLB loans to ease the repayment burden.

In the arrangement, NMB will clear the loan to HESLB and give the HESLB creditors more time to repay the loan.

“More students will have access to loans because now our debtors’ loans will be repaid,” he said.

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Dr Kinyondo from Repoa says the reduction in interest rates would bring some relief to customers, but might not have an impact on the economy as a whole because Tanzania’s problems are in the monetary policy.

“Now, people are forced to pay loans and so the reduction in interest rates is less likely to ease liquidity issues for many individuals and businesses,” Dr Kinyondo said.

Prof Semboja Haji from the University of Zanzibar says the reduction in the interest rates would increase customers’ capacity to borrow and most likely consumption.

“The reduction in the interest rates will also most likely address the issue of non-performing loans,” Prof Semboja noted. NMB has also reduced interest rates for Small and Medium-Sized enterprises (SME’s) to 19 per cent from 21 per cent while that of Macro SME’s has been reduced to 21 per cent from 23 per cent.