Bank of Tanzania (BoT) Governor Professor Beno Ndulu speaks during closing day of 18th finance institutions in Arusha yesterday. PHOTO| FILBERT RWEYEMAMU
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Prof Benno Ndulu, the BoT governor, said yesterday the central bank was fully aware that financial institutions were going through a rough patch as a result of the decision by the Treasury to institute tighter controls on its finances.
Arusha. The Bank of Tanzania (BoT) has pledged to come to the rescue of commercial banks that are reeling from a biting liquidity crisis sparked by the government’s shock decision to withdraw its funds.
Prof Benno Ndulu, the BoT governor, said yesterday the central bank was fully aware that financial institutions were going through a rough patch as a result of the decision by the Treasury to institute tighter controls on its finances.
The BoT chief fell short of explaining exactly how the regulator would assist struggling banks, but still told bankers to be more innovative in navigating the new terrain and stop depending on government deposits for survival.
Nevertheless, Prof Ndulu assured bankers the BoT would play an active role in finding a lasting solution to their plight.
“We are aware that stakeholders are working on the problem and they will come up with solutions because the economy depends on investment which is facilitated by loans from financial institutions,” he said.
The BoT governor was addressing reporters at the end of a two-day meeting of bankers.
He said the central bank would facilitate a process that could see commercial banks undertake their responsibility of issuing loans again.
Faced with a squeeze on cash in the aftermath of the government pull-out, some commercial banks that had public institutions as their biggest clients were forced to slow down on the issuance of loans.
Prof Ndulu expressed concerns that commercial banks were failing to meet their obligations, especially in extending long-term loans which facilitate investment.
“Banks can focus on deposits, but as I said a day ago, for every Sh100, Sh60 is outside the banking network. This shows that banks have an opportunity to improve their business if only they can convince these people to save,” he said.
He also urged investors to look beyond internal capital sources saying no country solely depended on local funding for development.
“Take China, for instance, most of its capital for heavy investment is sourced outside,” he said. Prof Ndulu said he had accepted a plea by financial sector stakeholders to put more emphasis on the issuance of loans.
He noted that the BoT backed proposals to widen credit reference bureau systems to assist loan seekers.
The arrangement could help, for instance, those in the agriculture value chain, to access capital ease, conduct their activities more efficiently and get reliable markets for their produce.
Meanwhile, Prof Ndulu said Tanzania was well-positioned to conduct business with landlocked countries such as Malawi, Uganda, DRC and Zambia. He said the financial sector should play a central role in facilitating business with these nations, especially in transportation.
“For business to succeed we need efficiency at the port, reliable infrastructure and a seamless taxation system. All these factors will ensure quality services which will attract more trade,” he said. Dr Charles Kimei, chairman of the Tanzania Bankers Association (TBA) and CRDB managing director, said the two-day meeting had given bankers a deeper insight into government plans and strategies on how it wants to build the economy.
He said commercial banks would survive in the prevailing situation, citing CRDB, which has collected Sh500 billion in deposits, and loaned to businessmen.
