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BoT streamlining financial services

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by BabuK, Feb 17, 2012.

  1. BabuK

    BabuK JF-Expert Member

    Feb 17, 2012
    Joined: Jul 30, 2008
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    The Bank of Tanzania (BoT) has launched measures to ensure funds outside the formal banking system are recaptured through the introduction of licenced agent services.


    Speaking at the East African Bank governors meeting in Nairobi, the BoT Governor Prof Benno Ndulu said open market mechanisms were being encouraged to bring excess money back into the banking sector through the buying and selling of government securities.
    However, Ndulu regretted the limited public participation in the securities market, insisting that in every 100 shillings issued by the Central Bank, about 30 to 40 was held by the commercial banks.
    Similar measures have also been implemented in Kenya, which allowed banks to licence agents to operate banking services.
    "Shallow and thin financial markets limit the transmission mechanism of the monetary policy stance through credit and interest rate channels," Ndulu said
    The bank governors who met in Nairobi this week discussed the causes of high inflation in the East African region and called for fiscal convergence across the region.
    The discussions were convened by the African Development Bank in response to a series of speculative attacks against the currencies of various East African economies in the wake of the European debt crisis.
    They called on their governments to curb inflation by ensuring better financial discipline and expanding the independence of the respective central banks.
    Central bank governors said that fiscal discipline amongst the respective governments was the key to domestic price stability and curbing inflation.
    Cleve Gatete, the Central Bank of Rwanda governor, said while efforts were being made to ensure the stability of the banking sector through increased supervision, the behaviour of the government was critical in ensuring the stability.
    "The Bank of Uganda could not do anything to curb the exchange rate depreciation compared to Kenya when the rate overshot," said Adam Mugume, director of research from the Bank of Uganda.
    The Ugandan shilling depreciated to a low of 2,508 against the U.S dollar in June 2011 as the country’s walk-to-work protests took effect.
    Njuguna Ndungu, governor of the Central Bank of Kenya (CBK), told Xinhua that he spearheaded some innovative banking methods that had attracted the interest of the Group of 20.
    Njeru Githae, Kenya's acting finance minister said the Treasury was in discussions with CBK to find ways of dampening appetite for imports in a bid to step up demand of local products, which will ease pressure on the local currency whose value was eroded last year.
    Bank governors at the meeting stressed the expansion of lending to the private sector was mainly stimulating the depreciation of local currencies and piling pressure on the stability of prices of goods and services.
    They cautioned that lack of appropriate measures to deal with price fluctuations would hamper overall Gross Domestic Product (GDP) growth in the region.
    "The inflation tide has been dissolved, but there lies a need to look into the prices of food and oil which have remained persistent," Ndungu said.
    The bankers predicted that global food prices were set to remain high with annual food price index for 2011, exceeding the 2010 annual index by 24 percent.