REDUCTION in Statutory Minimum Reserve (SMR) and decrease in discount rate are the major reasons behind the dropping interest rates that commercial bank charge on loans.
SMR is the amount of money that commercial banks deposit with the Bank of Tanzania (BoT), while discount rate is the interest that the central bank charges on its credits to commercial banks through the interbank market.

The Deputy Minister for Finance and Planning, Dr Ashatu Kijaji, said here yesterday that the SMR reduction from ten to eight per cent and the reduced discount rate from 16 to nine per cent since April, last year, were aimed at stimulating growth through credit facilities.
SMR is the amount of funds which commercial banks are required to deposit at BoT while discount rate is applicable on loans issued to banks by the central bank through the interbank market.
“The fiscal measures by the central bank have yielded positive results to financial institutions; their liquidity has improved and they can provide loans to their customers,” Dr Kijaji explained while officiating at a workshop that attracted Members of Parliament (MPs), representatives from development partners, heads of financial institutions and Ministry of Finance officials attended the workshop.
Speaking with the ‘Daily News’ on Tuesday, Director of Tanzania Information Services (Maelezo) and Government Spokesman, Dr Hassan Abbasi, said the financial sector was key to the country’s envisioned industrial economy.
Dr Abbasi urged customers to use the loans for development and fulfil their obligations by repaying the money. Since BoT made the downward revision of the rates to the financial institutions last year, major commercial banks have lowered their interest rates and extended the repayment period.
For starters, CRDB Bank has lowered personal interest rates for salaried workers from 22 to 16 per cent, with loans ranging between 50m/- and 100m/- repaid in a period of five to seven years.
NMB Bank followed suit, reducing its interest rate for salaried workers from 21 to 17 per cent and entrepreneurs will be charged 21 per cent from 23 per cent. Repayment period has been extended to 72 from 60 months.
BOA Bank Tanzania reduced interest rate from 22 to 11 per cent. Chances are high that other banks will join the bandwagon.
“The government highly appreciates the move by banks to lower their interest rates; the move will play an important role towards the vision of attaining industrialised economy by 2025,” stated Dr Kijaji.
Dr Kijaji urged financial institutions to throw more weight on provision of credits to agricultural sector because of its significance in the industrial economy.