Minister for Finance, Dr William Mgimwa

The government has recruited a consultant to advise it on the establishment of a credit reference bureau and credit reference data bank in order to expand credit availability.

According to the Minister for Finance Dr William Mgimwa, the consultant has started with the installation of equipment and training of potential users.

"This is aimed at improving the environment for availability of medium to long term credits for housing, agricultural development and investment…"he explained and added that regulations for development financing banks have been prepared and reported in the Government gazette of March this year.

According to the Bank of Tanzania (BoT), the bureau is expected to start operations in September in an effort to facilitate easy access to borrowers’ information by bankers.

THE bank holds that having credit information system in place has many advantages to the financial sector.

This includes improvement in the performance of the sector and stimulating economic development by addressing the impediments that contribute to the increasing number of non-performing loans.

Also, borrowers may use their positive credit history as collateral to access loans at better rates and seek more competitive terms from different lending institutions.

By addressing the problem of information asymmetries, the credit information sharing system is expected to promote the level of trust between lenders and borrowers, resulting in increased volume of credit in the economy.

The trust is also, in theory, supposed to increase transparency and competition among lenders.

BoT has already invited interested operators to apply for credit reference bureau licenses.

Private credit reference bureaus would have access to the BoT managed Credit reference Databank as well as other credit sources which are not regulated by BOT, while commercial banks would get information from the private credit reference bureaus.

He added that BoT had in the past allowed Tanzania Bankers’ Association (TBA) to host the credit reference databank, but some banks were reluctant to share information through it, and that is why this time around it will be housed at the BoT.

In future BoT will be happy to let a private operator run the databank a bank representative disclosed.

According to Mgimwa, credits to the private sector have increased to 23.3 percent compared to 21.9 percent in the previous year. The finance Minister attributes the increase to increased domestic financial assets and the parallel fall in foreign financial assets in banks.

Credit to the private sector included personal loans of 21.9 percent, commercial loans 19.9 percent, manufacturing loans 11.9 percent, and agriculture loans 11.8 percent and transport and communication loans 7.9 percent in 2011.