BoT calls for transparency in loan interest rates

Dar es Salaam. The Bank of Tanzania (BoT) has directed commercial banks to enhance transparency in interest rates charged on disbursed loans to enable ordinary citizens to understand the repayment frequency and respective amounts.

The BoT deputy governor responsible for economic issues and financial policy, Dr Yamungu Kayandabila, issued the directives on Friday, June 7, 2024, when closing the first cohort of certified financial educators.

Comprising 86 graduates, the training aimed at imparting knowledge in financial calculations, personal financial protection, financial management, financial obligations, and money management, among others.

Read: Tanzania officially adopts interest rate-based monetary policy

Dr Kayandabila said the world, including Tanzania, was facing challenges brought about by technology commonly known as fintech, requiring the financial sector to look for solutions.

"The people managing the financial sector need to enable the average person to understand issues related to finance, including the formula for dividing the interest rates from the first month to the end of the loan," he said.

According to him, the public should be enabled to understand the formula used in the interest rate calculations, asking the Central Bank Academy to be close to the people and enable them to cope with the speed of change in the sector brought about by technology development.

He said that due to a lack of knowledge in financial matters, citizens have been misled and get into problems of money being stolen or engaging in careless investment.

"We have often heard of citizens complaining about their property being stolen or expropriated due to a lack of financial education, especially in unproductive investments after being misled by some financial education providers who lack pre-requisite expertise in the financial sector," he said.

Furthermore, he said that following the growing problem, BoT has started intensifying the provision of public education as an immediate strategy to address the discovered challenges.

According to him, Tanzania was too large to easily reach all citizens, forcing the BoT to involve education providers in the provision of public education through the Professional Certification Training for Providing Financial Education to the Public.

Dr Kayandabila said graduates have critical roles to play in bridging the financial incapacity gap and promoting financial inclusion for all.

"We strongly believe that you will continue to be ambassadors of financial education and bring about positive change in our communities, increasing the number of financially literate people and significantly contributing to the country’s economic growth," he said.

For his part, BoT Director of Financial Deepening and Inclusion, Ms Nangi Massawe, said the 86 financial education educators are a long-term dream of the national council for the inclusion of financial services, which is led by the Central Bank governor.

“The curriculum creation, launching, and implementation to certify financial education educators are being witnessed uniquely," she said.

She said hopes are that certified financial education educators will become ambassadors who will educate and provide financial education to the public.

According to her, having an educated public with the needed skills will enable them to meaningfully participate in the financial sector.

"Unfair practices in the financial sector, such as high interest rates, non-performing loans, fraud, cybercrime, money laundering, high fees and costs, as well as financial irresponsibility, will be significantly reduced," she said.