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`Development banks` are urgently desired
2008-01-29 09:21:12
By Editor
Over the past seventeen years or so, Tanzania has seen rosy developments in her monetary sector. In particular from 1991, the first generation of financial sector reforms was launched and has so far meticulously been managed.
Of course, the transition from a once wholly state-owned financial sector to a liberalised one was not that much smooth. We had to tolerate some of the unwanted pains during the process like the collapse of the Meridien Biao Bank, the Tanzania Housing Bank (THB) and the Greenland Bank.
Today some analysts think it was fortunate for Tanzania to experience individual banking crises as they occurred over time, as the mishaps are believed to have sent early warning signals to the central bank to consolidate its overall financial watchdog responsibilities.
For sure, putting aside the ongoing External Payments Account scandal, the Bank of Tanzania (BoT) has been ranked by multilateral funding agencies, including the IMF, as one the best financial sector`s `supervisor` in Africa.
This could partly explain why we are now hosting about thirty banks and financial institutions, all of them confidently performing financial intermediation.
So far so good, as regards the number of banks and the range of financial services now on offer.
However, we should quickly strengthen and deepen the reforms along two lines: One, design necessary conditions for the emergence of development banks. Two, finalise the institutional arrangement that would make banks feel secure to lend the farm sector.
Although there are plans to upgrade Tanzania Investment Bank (TIB) into a real pan territorial development bank, the speed towards that goal seems going at snail`s pace.
At the same time, it looks uncertain whether necessary conditions have been thought out clearly to enable other development banks emerge as well and compete with TIB in offering long term development finance. Certainly, this is no time to entertain monopolies any more.
Even without these banks, the state could provide some kind of majority guarantees for some well targeted growth sectors like tourism and manufacturing and allow long-term loans be channeled to eligible beneficiaries through existing banks.
For the same reasons, we are probably late in enacting laws, rules and regulations that would minimise the risks that bankers face in lending to the farm sector.
Undoubtedly, land is a sensitive national issue whose allocation needs to be handled with all care for social as well as political expediencies.
Yet, taking agriculture as the backbone of the domestic economy in a liberal environment, we need to ensure that capital moves in there to develop it, obviously from small-scale operations to large-scale undertakings.
In other countries, joint ventures have been made mandatory for large-scale farm investments, and the time of land leasing may also reflect the concentration of shares between locals and foreign interests.
Apparently, leasing finance laws will be enacted this year. Unfortunately, very few indigenous people are aware about their mode of operation and this is something the government should tackle from the word go.
Otherwise, we may come to discover too late that only some few clever foreigners and none-indigenous citizens benefit from this financing window.
It’s not too late to mount a public awareness campaign about these sources of long-term capital.
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