Borrowing cost falls slightly

Dar es Salaam. The cost of borrowing among Tanzanians decreased slightly in June despite speculations that the rates would increase.

Stakeholders had been worried that the borrowing rates could increase due to the fact that interbank rates — at which commercial banks borrow from each other — were on the rise since May.

But the Bank of Tanzania (BoT) latest figures reveal that the lending rates decreased in June to 6.07 per cent from 6.10 per cent a month earlier.

The fall means that Tanzanians can access loans at affordable rates for economic development. The interbank rates increased in June to an average of 27.97 per cent, the highest since April 2012.

CBA Bank treasurer Khamis Mwakibete said recently that if the pace of increase continued or remained as they were, there was a possibility that banks would find a way of passing the cost on to consumers.

“The cost of borrowing among banks has gone up significantly. This significantly affects individual banks as the interest expense is very high compared with the interest income,” Mr Mwakibete said.

According to the BoT, in June overall time deposit rate averaged 8.89 per cent compared with 9.01 per cent in May.

The 12- month-deposit rate decreased to 10.54 per cent from 10.66 per cent in May 2015. The average short-term-lending rates, which range up to one year, increased to 14.65 per cent from 14.27 per cent in the preceding month.

The spread between the one-year-deposit rate and short-term-lending rate widened to 4.11 percentage points from 3.61 percentage points in May 2015.