ARUSHA: VICE-PRESIDENT Dr Philip Mpango on Thursday proposed five key areas for the financial sector to work on for it to sustain and propel growth amid future headwinds.
The country’s financial sector, though is not out from the global headwinds, has posted a stellar performance after growing by 22.2 per cent in 2022/23 compared to almost 10 per cent in 2021/22.
Also, according to government latest data, the sector’s ratio of credit to the private sector to GDP reached 18.2 per cent compared to 16 per cent.
The Vice-President asked the delegates of the 21st Conference of Financial Institution (COFI) to deliberate strongly on areas that are threatening and challenging the financial sector amid global business disruption caused by logistic supply chain, geopolitics conflicts, and climate change.
“There are still a lot of headwinds globally hence you should continue to revisit laws and regulations to enable the sector excel,” Dr Mpango, who was COFI chief guest, said.
He said financial sector experts and authorities must continue working on strategies that mitigate the headwinds, including assessing risk management for individual, business, and the sector as whole to spearhead and strengthen research development (R&D) for markets. He called upon COFI 21 to come up with solution focusing on tackling shortage of foreign reserve and forex flexibility in the country.
He said the financial sector should also offer low interest loans especially to SMEs and farmers while controlling non-performing loans to the market benchmarks of 5.0 per cent, and pushing further financial inclusion, without forgetting measures to tackle climate change.
“The strong financial sector is the one that withstand headwinds…the sector performed well in post Covid-19,” Dr Mpango said.
“My tribute goes to the good work done by leadership of all financial sector institutions for making this sector strong and resilient by increasing creativity and the ability to adapt to the current environment”. The financial inclusion increased to 76 per cent last year from 65 per cent in 2017.
“This is a big step that we should all be proud of,” he said. Additionally, loans provided by banks to the private sector have increased significantly in the post Covid-19. The credit to private sector in 2022/23 reached an average of 19.8 per cent compared to 6.6 per cent in the previous two years.
Despite the ratio of credit to the private sector to GDP reaching an average of 18.2 per cent, this was lower than the average of 26.6 per cent for sub-Saharan African countries.
“This indicates that there is still a lot of work to do for stakeholders in the financial sector,” Dr Mpango said.
The two days 21st COFI, which started yesterday, has brought together some 1000 physical participants and 43 participate virtually, and is organised by Bank of Tanzania (BoT) in collaboration with Tanzania Bankers Association (TBA).
This year’s theme is ‘Strengthening Financial Sector Resilience in Challenging Economic Times. COFI is held every after two years. The BoT Governor, Mr Emmanuel Tutuba, said the sector has seen an increase in new financial services and changes in service delivery systems, aided by innovation and technological change.
“Until now, various transactions such as money transfer, payment of invoices and taxes are done within a short time through digital systems. “Previously, these transactions were done outside of digital systems and thus was costly and time consuming,” Mr Tutuba said.
He said the central bank continues looking on how to use digital systems to improve economic and financial resilience against disasters. The financial sector in 2022 grew by 9.2 per cent and contributed 6.6 per cent to the country’s GDP. The growth was better compared to 3.1 per cent growth and 2.2 per cent contribution in 2020.
“This sector has continued to contribute significantly to the implementation of the financial policy and simplifies payments in the country,” Mr Tutuba said.
Tanzania Bankers Association (TBA) Chairman Theobald Sabi said the sector is facing various challenges which mostly are imported due to the geopolitics that disrupt global logistic but the country continues to navigate them.
“In calm water every ship has a good captain” but not during the storm, Mr Sabi said. The TBA Chairman, who is also NBC Bank Managing Director, said the country’s financial sector managed to sail during the bad weather, thanks to strong monetary policy put in place during the headwinds. The financial inclusion in the banking sector increased by 22 per cent last year compared to 17 per cent in 2017. However, stakeholders said the penetration was still low, calling for more efforts to increase the level.
