In Summary
- Contractors must borrow from commercial banks, and they must also accept unfriendly market-driven lending rates. A bank dedicated to construction would benefit not only contractors but also the economy.
The idea of a construction bank specialising in
building projects is long overdue. For much too long, contractors have
complained about little access to cash to finance their projects. This
not only delayed completion but also compromised the profit margin.
Contractors must borrow from commercial banks, and they must also accept unfriendly market-driven lending rates. A bank dedicated to construction would benefit not only contractors but also the economy.
It would guarantee credit to contractors at
interest rates tailored to meet industry needs and ensure projects are
completed on time. This would stimulate the industry and set off a chain
reaction that would be felt in the construction and rehabilitation of
roads, airports and other transport networks.
The construction bank would also boost the capacity of local contractors to compete effectively with foreigners. China has done remarkably well with construction banks that finance their companies regardless of whether they are operating on the domestic front or abroad. The stakes are high either way and contractors would do well to join hands and raise the Sh15 billion seed capital required by the Bank of Tanzania to create their own financier. It is possible. All that is required initially is the will to succeed.
The government could help smooth out the process and ensure the bank takes off. It could even create regulations making it compulsory for members of the Contractors Registration Board to pay the bank’s capital contributions.
Banks are essential for growth and sectors such as
mining, education and manufacturing may find it useful to work towards
also having their own lender. Specialised banks will likely appreciate
the needs in specific sectors and guarantee stability of lending rates.
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