BOT – Avoid Borrowing for Short-Term Needs

BOT – Avoid Borrowing for Short-Term Needs

THE Bank of Tanzania (BoT) has advised citizens to refrain from taking loans solely to address short-term financial challenges, warning that such practices can lead to unsustainable debt burdens.

This comes amid growing concerns about the rise of personal borrowing, especially from digital lenders, which often leaves borrowers struggling with high-interest rates and unfavourable repayment terms.

The Bank of Tanzania (BoT) Senior Official, Mr Deogratias Mnyamani, said that many people take loans to meet immediate needs without fully understanding loan terms.

“There is still a major gap in financial literacy, with many Tanzanians borrowing to address short-term challenges but not considering all loan conditions.

“Many of them are simply borrowing to solve a problem at hand, but their repayment relies on faith and hope,” Mr Mnyamani said yesterday in an interview.

BoT’s latest monthly economic review shows that in August personal loans–primarily credit extended for small and medium enterprises (SMEs)–remained the largest component of credit to the private sector, at 36.4 per cent, followed by trade, at 12.8 per cent and agriculture, at 11.8 per cent. The total private sector loan portfolio was over 34tri/-.

He added that before borrowing, one should ensure they are satisfied with the terms and conditions to assess whether they can repay, rather than borrowing simply because they are in need.

Financial literacy, especially money borrowing, remains a challenge for many citizens. Therefore, the central bank has committed to continuing its efforts to provide financial education to increase public awareness.

In response to these challenges, BoT said it is on a verge of launching a national financial education campaign to help raise awareness about responsible borrowing.

“We believe this campaign will have a bigger impact in creating awareness to the public to enable them have informed decisions when it comes to borrowing,” he said.

Through increased financial literacy and tighter regulation of lenders, BoT aims to ensure borrowers are protected from predatory practices while promoting sustainable financial management among Tanzanians.

Last month, the central bank issued a new guidance note on digital lenders under tier 2 microfinance service providers, aimed at strengthening the supervision of digital lending operations in the country.

The regulator issued the guidance because digital lending grows in popularity, the need for a robust regulatory framework has become increasingly apparent.

“This aims to ensure compliance with financial consumer protection regulations, which include transparency, pricing, debt collection practices, protection of personal data and customer privacy,” the statement shows.

The commitment underscores the importance of safeguarding consumer interests in a rapidly evolving financial landscape.

Source: allafrica.com

Original Media Source

Share this news

Facebook
Twitter
LinkedIn
WhatsApp

This Year's Most Read News Stories

Tanzania's opposition party ACT Wazalendo honours veteran politician under new policy
Tanzania Foreign Investment News
Investment News Editor

Tanzania’s opposition party ACT Wazalendo honours veteran politician under new policy

Unguja. Opposition party ACT Wazalendo today officially bids farewell to its former Chairman, Juma Duni Haji, also known as Babu Duni, as part of a new policy designed to honor retired senior leaders at a ceremony held at Kiembesamaki, Zanzibar.

The initiative highlights the party’s commitment to recognizing and supporting individuals who have served with dedication and integrity.

Babu Duni, who stepped down earlier this year, was succeeded by Othman Masoud, now the First Vice President of Zanzibar.

The policy aims to provide ongoing respect and support to retired leaders, ensuring their continued recognition and contribution to the party’s development.

“Recognizing their significant contributions to the development and prosperity of the party, this policy ensures that retired leaders continue to be acknowledged and respected by both the party and the community,” the policy states.

To benefit from this policy, leaders must not have left or been expelled from the party. They must have served the party with honor and dedication. The national leadership committee will determine whether a leader has fulfilled these criteria.

The policy seeks to honor retired leaders, protect their dignity, acknowledge their contributions, leverage their ideas for the party’s growth, and support them to the best of the party’s ability.

In honoring these leaders, the party will provide a vehicle, the type of which will be determined by the national leadership committee. Additionally, they will receive a monthly allowance, with the amount also set by this committee.

Other benefits include health insurance. If a leader does not own a home, the party will cover their rent at a rate decided by the committee.

The leadership committee may also grant special recognition based on the leader’s contributions. Retired leaders will participate in decision-making meetings according to procedures outlined in the party’s constitution.

Depending on the party’s resources at the time, the policy may also apply to retired deputy chairpersons for both the mainland and Zanzibar, the Secretary-General, Deputy Secretary-General for both mainland and Zanzibar, and the party’s Attorney General.

Additionally, leaders, executives, or members with exceptional contributions to the party’s protection, advocacy, and defense may also benefit, as determined by the leadership committee.

Currently, those who are eligible for benefits under this policy include Juma Duni Haji (retired party Chairman) and Zitto Kabwe (retired party leader).Continue Reading