The government says it is implementing a range of policy and regulatory measures aimed at creating conditions for commercial banks to offer loans at more affordable interest rates, a move expected to ease the cost of borrowing for businesses and other borrowers.
Deputy Minister for Finance Laurent Luswetula told Parliament in Dodoma that the government’s measures include maintaining monetary policies that keep inflation under control, as inflation is among the key factors considered when determining lending rates.
He was responding to Mpanda Urban MP Haidary Hemed Sumry, who wanted to know what the government was doing to reduce interest rates on business loans and enable borrowers to repay their loans more easily and on time.
Mr Luswetula said the government does not directly set interest rates charged by commercial banks, explaining that lending rates are determined largely by market conditions.
These include the inflation rate, the risk of borrowers defaulting, banks’ operating costs and the profit margins targeted by individual financial institutions.
“The government continues to take various policy and regulatory measures to enable commercial banks to provide loans at more affordable interest rates, including implementing monetary policies aimed at controlling inflation,” Mr Luswetula said.
The Deputy Minister said the Bank of Tanzania (BoT) continues to review and adjust the Central Bank Rate (CBR) in response to economic developments.
The objective, he said, is to maintain price stability while ensuring that there is sufficient liquidity in the economy to support lending and economic activity.
A stable inflation environment is particularly important for borrowers because rising prices can increase business costs and influence the interest rates charged by financial institutions.
Mr Luswetula also highlighted the government’s introduction of the Price Comparator System, which provides borrowers with greater access to information on interest rates and other charges imposed by financial institutions.
The system enables customers to compare different loan products before choosing where to borrow.
“This system increases transparency on interest rates and charges while helping borrowers make informed decisions about the financial services they need,” he said.
The system is also intended to encourage competition among commercial banks and other financial institutions. Increased competition could push lenders to improve their products and offer more competitive borrowing costs.
The government is also encouraging financial institutions to make greater use of Credit Reference Bureaus, which provide information about borrowers’ credit and repayment histories.
Mr Luswetula said reliable credit information helps banks assess borrowers more effectively and reduces uncertainty over the risk of loan defaults.
This, in turn, can lower the cost associated with assessing loans and potentially contribute to more affordable credit.
For small businesses and individual entrepreneurs, access to reasonably priced credit remains important for expanding operations, purchasing equipment, creating jobs and meeting working-capital needs.
The government’s strategy, Mr Luswetula said, is therefore focused on improving the overall lending environment through monetary policy, greater transparency, better credit information and stronger competition, rather than directly controlling the interest rates charged by commercial banks.