Economy-Tanzania - Despite posting huge profits, proportion of households with access to financial services, especially banks has remained minimal, thus impeding economic growth and development. Challenging experts on key growing sector in emerging African economies in Dar es Salaam over the weekend, the Permanent Secretary in the Ministry of East African Cooperation, Dr Stergomena Tax, said lack of formal financial services limits market exchanges, increases risks and limits opportunity to save. "Evidence shows that access to overall financial services is crucial to economic growth and poverty reduction," she said, asking the experts to play their role in translating outstanding performances towards addressing the problem of abject poverty in the society.

She said where formal financial services were lacking; households rely on informal services which are associated with high transactions costs. Ultimately, instead of supporting the impoverished people from poverty alleviation, it becomes burdensome and others plunged into heavy losses.

Even those with bank accounts, physical distances to banks or points of financial service add financial services to the majority of households. Higher lending rates for most commercial banks have also been one of the major obstacles to most people access loans which could have helped them invest into various economic activities.

In Tanzania for example, a number of measures are being adopted including the Bank of Tanzania (BoT) initiative to establish the Credit Reference Bureau (CRB) which aims to cut down interest rates staging to above 20 per cent.

Once in place, the bureau will help commercial banks to extensively scrutinise their borrowers; a move likely to curb loan defaults as well as boosting lending services.

"Intellectuals, economists, lawyers, business people, administrators and political elites have crucial obligations towards growth of the key economic sectors, as well as making the impoverished people test the benefits of their resources," she observed.

But for East African Community (EAC), Dr Tax said it has embarked on a project that would transform the EAC financial services sector through a project undertaken in partnership with the World Bank.

This follows a signing of a grant agreement worth 16 million US dollar (about 2.4bn/-). "The project aims to support EAC's efforts towards building a single integrated financial services market for the region," she said.

The PS added that harmonization of the financial services sector would play a key role in unlocking some of the benefits of the Common Market, by removing barriers to the free movement of capital across the EAC region.

She added that the East African states stand to gain by trading on a regional stock exchange, as the project envisions a single stock exchange. The EAC has started a process to harmonize capital market regulations to ease the movement of money across national borders, easing investors' participation in the financial sector.

Apart from harmonization process, governments are expected to integrate their financial market infrastructures, develop national bond markets and sign mutual recognition of supervisory agencies, allowing national regulators to recognize players from all member states.

With the project implementations, the market intermediaries would be able to freely extend services to pursue clients' deals into any of the five members and investors enjoy wide subscription of issued securities.

According to Mr John Miles, Chairman of the Association of Law Chambers ( ALN ), there is need to adopt swift measures intended to address challenges facing fast growing economies including the ever increasing cost of power, inefficient tax collections and political interferences.

On his part, Adept Chambers Managing Partner, Dr Fredrick Ringo said the conference was expected to come up with realistic and achievable recommendations that would assist in guiding the development of the economies and its people.

Apart from Tanzania, other countries forming ALN include Botswana, Burundi, Ethiopia, Kenya, Mauritania and Mozambique.

Sebastian Mrindoko

Tanzania Daily News/22/03/2011