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"id": 166252,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/166252/?format=api",
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"type": "speech",
"speaker_name": "Mr. Nguyai",
"speaker_title": "The Assistant Minister, Office of the Deputy Prime Minister and Ministry of Local Government",
"speaker": {
"id": 113,
"legal_name": "Lewis Nganga Nguyai",
"slug": "lewis-nguyai"
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"content": " Mr. Speaker, Sir, on behalf of the Deputy Prime Minister and Minister for Finance, I beg to reply. (a) I am aware that as at October, 2010, commercial banks were lending an average weighted rate of interest of 13.85 which is over 12 per cent. The average weighted rate of interest for all saving products over the same period was 3.58 per cent and 1.58 per cent higher than the 2 per cent. I am aware that the lower interest rates on savings and the higher interest rates on lending are likely to discourage savings and borrowings respectively. However, I wish to point out that the country has realized tremendous growth. Deposits in the past two years and this growth have contributed to the putting down of pressure on deposit rates, particularly as the demand for loans were low due to the sluggish growth of the economy. With the economic recovery expected this year and in the mid-term, we anticipate that deposit rates will begin to rise as banks compete for resources to lend. Indeed, this development should reduce the spread between the lending and deposit rates. (b) Regarding the lending rates, as our fiscal consolidation continues to gather pace, we anticipate that the interest on the Treasury Bills will remain subdued. This will encourage banks to compete more vigorously with each other for lending to the increasingly vibrant private sector. The increased competition should lead to lower lending rates, which combined with the envisaged higher deposit rates should further narrow the interest rate spread. (c) Indeed, some banks lowered the rates in response to easing the monetary policy of the CBK although we would have preferred to see sharper reductions. However, it is important to emphasize that there are structural impediments that prevent banks from reducing rates significantly including, for example, the long time it takes for banks to realize collateral. We are taking steps to address the impediment and we believe this will result in lowering the banksâ operating costs and facilitate an extension to the savings to the consumers in the form of lower lending rates. Ultimately, enhanced competition within the broader financial sector accompanied with prudent micro-economic policies is the only sure way to guaranteeing that the lending rates remain low on a sustained basis."
}