Significance of Bank’s Lending Rates to Economic and Business Growth in Tanzania

The issue of banks in Tanzania being advised to reduce loaning interest rates is uncommon on the lips of politicians, government officials, President herself borrowers and loan seekers, weather small or large seeking loans to run their businesses. Despite these efforts, calls and cries, interest rates charged by lending institutions, small, medium, and large remain high, something that in turn affects the growth of productive economic activities, especially for SMEs and start-up businesses in Tanzania. Operational and up running businesses are rescuer in job creation and a reliable source of tax base and a revenue source for the government. To date, various steps have been taken by the central bank of Tanzania which is the custodian and the regulator of financial institutions operation in Tanzania, but despite such measures interest rates charged remain high. Why are interest rates not declining in Tanzanian market? Is approach used wrong or inappropriate? or is there a problem in the financial system and interest rates charging system or the way rates charged arrived at in Tanzania? These are the issues that have led and promoted to the assessment of why the situation remains the same despite various calls to reduce the rates and suggestions as to what exactly are contributing drivers to the situation that make it challenging for the banks and other financial institutions to lower loaning rates. The paper concludes with hints as to why it will be challenging to bring down loaning rates before proposing measures, if espoused could produce different desirable outcome.