This will encourage a culture and responsible credit taking behavior in the financial sector in Tanzania. It synchronizes information on clients allowing financial institutions to access prospective clients' credit history. It reduces incidences of institutions lending to habitual defaulters.
"BOT is certain that the newly introduced system will increase access to credit in the economy and this will lead to reduction in lending rates and lower the rate of non-performing loans," Mr. Juma Reli, Bank of Tanzania Deputy Governor of Administration and Internal Controls (AIC) said.
Reli said t the CRS aims at promoting a sound and stable financial system to build a culture of paying debts.
"This would in turn, improve credit risks management in the economy and increase international and local investors confidence in the country's financial systems," Reli said, adding that lack of CRS has been one of the major factors limiting citizen access to credit in the banking and financial sectors..
Many small firms and individuals try to borrow from banks and other financial institutions but due to inadequate information about borrowers, lenders have termed it as a high level lending risk..
"There is usually disparity of knowledge (information asymmetry) between the lender and the borrower about the past repayment behavior and the current level of debt and therefore making banks fail to make informed decisions on their lending operation," he said.
He insisted the aim of introducing the credit reference systems in Tanzania is to encourage a culture and responsible credit behavior in the financial system.
The central bank issued regulations for the operation of databank and private credit bureau in may 2012 followed with an engagement of CreditInfo International in assisting setting up a credit reference databank in the country in October 2011.
About 26 banks have embraced the CRS that started in June this year. Nine of them are already upgrading their systems.
BOT's Director of Banking and Supervision, Mr. Agipiti Kobelo said the expansion of credit in the economy is good at making the availability of credit information on commercial, personal or micro-loans indispensable for financial institutions in order to make informed credit decisions.
Kenya in VAT hike
Kenyans could be headed to more tumultuous economic times as the government mull over a proposal to raise Valued Added Tax (VAT) collection from the current 16 per cent to 20 per cent.
This would automatically translate to a rise in the cost of living for the already overstretched Kenyan spender. Treasury officials last week gave the strongest indication that the government will be lobbying MPs to pass this as part of the controversial VAT Bill.
Globally, most countries are moving toward the 20 per cent figure which has been declared as the official best practice.
Most affected by the bill will be essential commodities such as food, agricultural inputs, and sanitary towels among others.
Kenya inflation down
Kenya's inflation levels have dropped to a record 5.32 per cent from a high of 19 per cent just six months ago.
This drop has been mostly aided by a general drop in the cost of food items which are billed as the main drivers of inflationary pressure.
The opposite is however true with fuel prices which shot up in the middle of this month following the latest review by the Energy Regulatory Commission (ERC).
Pressure is now piling on commercial banks in the country to cut their lending rate to reflect the general drop in inflation and the Central Bank Rate. Players are however reluctant to effect these changes despite pressure from consumer bodies in the country.
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