VICE President Dr Philip Mpango yesterday made a strong call for commercial lenders to lower interest rates to provide affordable loans to small scale entrepreneurs to grow their business and contribute to economic development.
Dr Mpango made the call while visiting one of the pavilions during the official opening of the 45th Dar es Salaam International Trade Fair (DITF) taking place at Sabasaba grounds along Kilwa road in Dar es Salaam.
Commercial banks are required to create enabling environment for entrepreneurs to have access to affordable loans that can spur their businesses to grow and become bigger.
Entrepreneurs boost economic growth by introducing innovative technologies, products, services as well as providing new opportunities in the short and long term.
But where interest rates charged by commercial lenders are high, small businesses that operate with limited cash flow do not grow and this impedes contribution to the economy.
To meet the conditions put by lending institutions, small business owners have been setting aside more money to repay and service loans and debt which reduces their income available of the business.
Last month, President Samia Suluhu Hassan directed the central bank to take appropriate measures to address high interest rates, calling for reasonable levels for lenders.
The Head of State said various measures have been taken by the government through the central bank to enhance the capacity of commercial banks to provide long term affordable loans.
Some of the measures taken include the establishment of credit reference bureaus, lowering the statutory minimum reserves requirement, lowering the discount rates as well as providing regulatory flexibility on the restructuring of loans.
For example, the Bank of Tanzania (BoT) lowered its benchmark lending rate from 7 per cent to 5 per cent to cushion banks from Covid- 19 impact last year.
Also, lowered the Statutory Minimum Reserves (SMR) to 6 per cent from 7 per cent. The measures sought to increase the ability of banks to borrow from the central bank with less collateral than before.
Nonetheless, despite the measures and efforts taken by the government, interests have remained high, with some financial institutions charging above 20 per cent interest rates.
This is why President Samia decided to issue the directives to the BoT as a regulator to make sure that commercial banks reduce interest rates to at least a single digit to give entrepreneurs access to affordable loans.
Therefore, it is high time that commercial lenders work and implement the directives issued by the Head of the State to lower lending rates for more entrepreneurs to borrow which would, in turn, boost their loan portfolio.