The government has reaffirmed its commitment to creating conditions that will enable businesses to access loans at more affordable interest rates, saying monetary and regulatory measures are being implemented to address the cost of borrowing.
Deputy Minister for Finance Laurent Luswetula told Parliament in Dodoma that the government was taking several measures to support access to affordable credit, while maintaining that lending rates are determined by commercial banks based on market conditions.
He was responding to Mpanda Urban MP Haidary Hemed Sumry, who asked what the government was doing to reduce interest rates on business loans and enable borrowers to repay their loans on time.
Mr Luswetula said the government does not directly set lending rates for commercial banks. Instead, rates are influenced by several factors, including inflation, the risk of loan defaults, banks’ operating costs and expected returns.
“The government continues to take various policy and regulatory measures to enable commercial banks to provide loans at more affordable interest rates,” he said.
Mr Luswetula said controlling inflation remains an important part of efforts to reduce borrowing costs because inflation is among the factors considered when banks determine lending rates.
He said the Bank of Tanzania (BoT) continues to adjust the Central Bank Rate (CBR) in line with economic conditions to keep inflation within the desired range while ensuring adequate liquidity in the economy.
Adequate liquidity, he said, is important for supporting credit availability and creating an environment in which businesses and individuals can access financing at more manageable costs.
The government has also introduced the Price Comparator System, which enables borrowers to compare interest rates and other charges offered by different financial institutions.
Mr Luswetula said the system was designed to improve transparency in the financial sector and help borrowers make informed decisions before taking loans.
The system could also strengthen competition among commercial banks as customers become better able to compare the cost of different credit products.
For small businesses, which often depend on bank financing to maintain operations and expand, greater transparency could help them identify loan products that better match their financial capacity.
The government is also encouraging banks and other financial institutions to make greater use of Credit Reference Bureaus, which provide information on borrowers’ credit and repayment histories.
Mr Luswetula said reliable credit information helps banks assess borrowers and manage the risk of loan defaults.
Reducing uncertainty over borrowers’ repayment capacity can, in turn, lower the costs associated with credit assessment and potentially support more affordable lending.
The government’s measures therefore seek to address the cost of borrowing through economic stability, increased transparency and improved credit information, while leaving commercial banks to determine their lending rates according to market conditions.
For businesses and other borrowers, the measures are expected to strengthen access to information and improve competition in the financial sector, while efforts to keep inflation under control create a more stable environment for borrowing and investment.