PS calls on banks to lower lending rates to boost borrowing

By JIMMY LWANGILI

FINANCIAL institutions have been told to look at how they can lower interest rates on lending to make them affordable to the people and hence spark credit growth.

Launching Standard Chartered Bank Social Economic Impact Report in Dar es Salaam yesterday, the Permanent Secretary in the Ministry of Industries, Trade and Investment, Prof Elisante Ole Gabriel called on the banks to provide loans to youth groups and some traders without interest and use the corporate social responsibility fund to compensate interests.
“My advice to other bank institutions to cope with this system of Standard Chartered Bank to assess contribution on social-economic development in the society through their activities,” he advised.
He said the government through the Ministry of Industries, Trade and Investment will continue to cooperate and support the financial institutions. The aim is to support the country to reach the goal of industrial economy.
The call came amid concerns over high interest rates on loans which make loans unaffordable despite Central Bank decision to lower interest rates twice last year so as to reduce borrowing costs and boost lending to the private sector.
The Central Bank reduced its discount rate by three per cent from 12 per cent to nine per cent in August to make borrowing more affordable to member banks. It had slashed the discount rate by 4 per cent that 16 per cent to 12 per cent in March.
Lower interest rates make borrowing cheaper which in normal circumstances it should increase the demand for bank lending from firms and consumers, he said. In normal circumstances, a cut in interest rates probably would increase bank lending, he said. The Acting Director of Standard Chartered Bank, Ms Ruth Zaipuna said in the study the bank traced its financial flows throughout an economy in Tanzania, Kenya and Uganda where the bank operates.