Tanzania Lending Rates May Drop Once Credit Bureau Operating, Banks Say
Banks in Tanzania, East Africa’s second-biggest economy, may further reduce lending rates once a planned credit reference bureau becomes operational, said Lawrence Mafuru, chairman of the country’s industry association.
“We are currently lending at between 8 and 15 percent, and this has come down over time from 30 percent,” Mafuru said in an interview yesterday in Dar es Salaam, the commercial capital. “We now see interest rates only dropping after a credit reference bureau is established and national identity cards are introduced,” he said.
While bad loans have declined, banks remain concerned about the risk of impairments, Mafuru said. “There are still many people in the market who think they can get away with not paying a debt, so we include that risk of impairment in the interest rate.”
The credit reference bureau, expected to start by the end of the year, will give banks access to potential customers credit records and details, reducing the risk of bad debts. Tanzania’s average lending rate declined to 14.76 percent in the year through March from 14.81 percent a month earlier, according to the central bank. The Bank of Tanzania doesn’t have a benchmark lending rate and sets monetary policy by targeting money supply.
Non-performing loans declined to 252 billion Tanzanian shillings ($166 million) in 2010 from 388 billion shillings a year earlier, while the ratio to advances fell to 6 percent last year compared with 11 percent, Mafuru said.
Revenue in the industry will probably expand by as much as 20 percent this year, he said. Credit to the private sector rose 18 percent to 4.1 trillion shillings last year, while banks’ assets increased 22 percent to 9.3 trillion shillings, he said.
Kenya, East Africa’s biggest economy, started its first credit reference bureau last year.
To contact the reporter on this story: David Malingha Doya in Dar es Salaam at dmalingha@bloomberg.net
To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net
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