Bank of Tanzania (BoT) is making it easy for banks to lend in a new policy, dropping the requirement for a national identification card to register bank agents while lenders would only require 18 months’ business experience.

According to BoT Governor Prof Florens Luoga, this policy is expected to contribute to an increase in loanable funds to banks through deposit mobilisation. BoT also intends to lower lending rates to the private sector.

Prof Luoga said the bank has introduced special loans amounting to Tsh1 trillion ($432 million) to banks and other financial institutions for on-lending to the private sector.

“The Bank of Tanzania shall provide a special loan to banks and other financial institutions at three percent per annum for pre-financing or re-financing of new loans to the private sector,” he said.

Banks wishing to access the special loan facility shall charge an interest rates not exceeding 10 percent per annum on loans extended to the private sector. This measure intends to increase liquidity to banks and reduce lending rates.

“This provide an opportunity to banks to extend more credit to the private sector than before,” said Prof Luoga.

BoT also announced a decrease of statutory minimum reserve (SMR) requirement, adding that banks that extend credit to agriculture shall be eligible for a reduction in SMR amount, equivalent to the loan extended. Prof Luoga said banks will have to show proof of lending to agricultural firms at an interest rate not exceeding 10 percent per annum.

The BoT bank said prior to the outbreak of Covid-19, macroeconomic conditions in Tanzania were stable.

Tanzania Private Sector Foundation executive director Francis Nanai said firms have been constrained financially due to a slowdown in economic activity.