A report has painted a gloomy picture of Tanzania’s stubbornly low saving and borrowing levels despite a rise in formal financial inclusion over the past few years.
The report by Economist Intelligence Unit shows credit was just 14.3 per cent of the country’s gross domestic product, infinitesimally below sub-Saharan Africa’s average of 45.8 per cent. That makes Tanzania’s possibility of enjoying benefits of increased financial inclusion elusive.
Saving is closely related to physical investment. Moreover, substantial levels of credit are healthy to stimulate consumption and investment and subsequent business growth. Sadly, lending rates are inordinately high as the government keeps on borrowing funds although the Bank of Tanzania moves to loosen its monetary stance over the past year. The government has pledged to reduce domestic borrowing to avoid crowding out investment and curtailing growth.
Although some progress has been made to address a number of challenges, such as expanding the credit bureau, more efforts are needed to improve the situation.
However, complaints have been swirling that the country’s insolvency system is dysfunctional, legal processes are slow and credit information is fragmented and -often unreliable.
We call on the government deepen financial reforms for more Tanzanians to benefit.