Dr Mpango was speaking in Dar es Salaam at the 19th Conference of Financial Institutions which brought on board commercial banks executives from Tanzania, the East Africa Community (EAC), and Southern African Development Community (SADC).
Themed: ‘Accelerating Financial Sector Development in Tanzania’ bankers and other financial sector players are coming together for two days to discuss progress, challenges and the way forward of the financial sector in the country.
The minister said that less than 5 per cent of the gross loans offered by commercial banks and other financial institutions in Tanzania is allocated to the agriculture sector.
“This is very minimal,” he said, blaming financial institutions for not playing their role effectively in financing farmers and the entire agricultural industry.
“We all know that industrialisation is one of the government’s priority but can’t be achieved without plenty agro-products to feed the industries. Your appetite of financing farmers is not satisfactory with only less than 5 per cent of the loans offered. I hope that from this conference you will come up with strategic plans of financing large and small scale farmers,” said Mpango.
According to him, 66 per cent of Tanzanians in rural areas are working in agriculture sector but financial institutions have not reached the rural areas thus deny them from securing loans for agricultural activities. He said even interest rates charged by banks are still high most of them at 17 per cent.
Agriculture sectors grew by 5.3 per cent four years ago compared to the growth target by the government of 13.1 per cent in 2025. The sector is not only for industrial raw materials but only a key source of food by households and poverty reduction.
“It has reached a time whereby securing a loan has become a very complicated process. I have approached one of the local banks in need for a 200mn/- loan but faced hardships. The person who attended me asked me how much is my salary, after telling her she said that with my salary I can’t secure more than 20mn/-. This scenario portrays how banks treat common borrowers,” said the minister.
Replying on this concern, Tanzania Bankers Association (TBA) chairman, Abdulmajid Nsekela said that through the conference, bankers will come up with ways on how to consider the financing of the agriculture sector players.
“To ensure this issue work for us, we call upon authorities to make sure that majority of Tanzanians residing in rural areas have their national identification cards so that they can access financial services.
I also promise you that bankers will continue cutting down interest rates depending on the market trends and business doing environment,” said Nsekela.
For his part, the Governor of Bank of Tanzania (BOT) Prof Florens Luoga, said that the financial sector has grown at an average of 3.1 per cent contributing 2.6 per cent of the economic growth for the period of five years that ended in 2018.
“There are 61 commercial banks and financial institutions with 838 branches and 22,481 bank agents. According to FinScope Tanzania 2017, 65 per cent of adults had access to financial services during the period compared to 45 per cent in 2009,” said Prof Luoga.
He asserted that loans to private sector reached 9.3 per cent in September this year from 3.4 per cent last year and 2.2 per cent in 2017.