The Bank of Tanzania (BOT):
The Bank of Tanzania (BOT) bears the responsibility of establishing conducive monetary stipulations that will generate low and stable inflation over time. As it is disclosed in the BOT Act, 1995 section 5 (3), "The primary objective of the Bank shall be to formulate and implement monetary policy, directed to the economic objective of maintaining price stability, conducive to a balanced and sustainable growth of the national economy of Tanzania". Price stability, a single-policy objective has proved success in the economic development as compared to the period before 1995 when the BOT was operating under multiple-policy objective. It is also responsible for supervising, controlling and enhancing disclosure and stability of the banking sector. Other activities include participation in the inter-bank foreign exchange market, being an agent for the auctioning of government securities, and administration of the national balance of payments.
The bank has also subsidiary functions. These include the issuing of bank notes and coins for the intension of influencing currency in circulation outside banks; it also acts as a banker’s bank by accepting deposits and also acts as a reserve for commercial banks. It functions as Governments’ bank thereby making temporally advances to the government through its overdraft facility. BOT also performs payment services thereby providing central clearance and settlement facilities for interbank transactions. It provides advisory services to the government matters related to its functions, powers, duties, and the credit conditions in Tanzania.
BOT also functions as a guardian to Tanzania’s international reserves by determining the buying and selling rates of gold and foreign exchange in foreign exchange markets or reserves for the purpose of sustaining the national currency’s external value, supervision of banks and financial institutions and finally it promotes the financial developments in the country.
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In an effort to liberalise the banking sector, the Banking and Financial Institution Act, 1991 was introduced to provide the legal framework for banking operations in Tanzania that will grant authorization of financial institutions to receive money on current account subject to withdraw by cheque. As a result of the Act, the entry of new banks has enhanced financial competition resulting into some improvement of the quality and quantity of the financial services offered.
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The Insurance Industry:
The Tanzanian insurance industry offers various services including insurance credit, fire and property insurance, healthy insurance, motor insurance, life insurance, pension fund and general insurance. Efforts are being made to improve the provision of better service to client under the regulatory control of the National Insurance Corporation (NIC). NIC was the sector monopoly.
With the liberalization of the insurance industry through the Insurance Act. No. 18 of 1996, several local and foreign insurance companies have been established in the country. To date, there are many insurance companies, insurance brokers, insurance brokers and loss assessors. The supervision and administration of the insurance industry is under the Insurance Supervisory Department of the Ministry of Finance
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Non Bank Financial Institutions:
A non bank financial institution is any person authorised by law or the Bank to engage in banking business not involving the receipt of money on current account subject to withdrawal by cheque. The following are the non bank financial institutions that have been licensed by the Bank of Tanzania.
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Large projects, which may be of medium and/or of long-term period, require special arrangement of funding. A number of financing institutions that can provide loans to economically viable and technically feasible projects in the key industrial and agricultural sectors of the economy. These include:
- Tanzania Investment Bank (TIB), which grants medium and long-term loans to economically sound and technically feasible projects in the key industrial and agricultural sectors of the economy.
- Tanganyika Development Finance Company Ltd (TDFL), which promotes viable companies in industrial, agricultural, tourist and other undertakings based on the utilization of natural resources and the attraction or savings of foreign exchange.
- Other banks are Kilimanjaro Cooperative Bank and Mufindi Community Bank.
Other Financial Institutions:
The Post Office Savings Bank (POSB); this seeks to mobilize savings and fixed deposits. It has a network of 177 branches and 155 agencies. There are also at least three finance institutions/near banks’ (Savings and Finance Ltd, Crown Finance and Lease Ltd and Furaha Finance Ltd) and a host of Bureaux de Change, all of which seem to be locally owned.
The elimination of foreign exchange restrictions has allowed conducive environment for attracting potential investors and simplifying international transactions. The liberalization of external trade and payments was effected when the Foreign Exchange Act, 1992 was enacted to provide an enabling environment for efficient allocation of foreign exchange resources and for market determined exchange rates. The Interbank Foreign Exchange Market (IFEM) was introduced in 1993. In an effort to demonstrate the Government’s commitment towards free flow of currency; profits, dividends and capital can be readily repatriated.
The Tanzanian Financial markets are not well developed; application of electronic means of transactions is not yet in practice. The market consists of the sell of government securities; the Treasury Bills and Treasury Bonds. Others are the Repo, Interbank Money markets, Foreign Exchange Markets and the Interbank Foreign Exchange Market (EFEM).
The foreign exchange market in Tanzania is composed of wholesale and retail markets. The IFEM is a wholesale market, which plays a significant role in the determination of the country’s official exchange rate, and the provision of funds for the accumulation of international reserves.
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Interest Rate Development:
During the quarter under review i.e. April to June 2003, interest rate continued to exhibit fluctuations that started a few months back. For the month of April for instance, the overall Discount rate, the rate that the central bank charges when lending the commercial banks was 11.08 per cent compared with the rate 10.35 per cent for the month of March 2003. However the overall time deposit rate fell from 3.65 per cent during the month of March 2003 to 3.53 percent during April 2003.
Tanzania Investment Centre
For further information please contact:
Bank of Tanzania (BOT)
Street Address: Mirambo Street, No. 10
Postal Address: P.O Box 2939,
Dar es Salaam, Tanzania
SWIFT Code: TANZTZTX