The Impact Of Financial Sector Reforms On Interest Rate Spreads In Tanzania

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University of Dar es Salaam
In sub-Saharan Africa, financial systems have been shackled with extensive, imprudent regulations operated on inefficient grounds and dominated by few institutions, mainly state owned commercial banks (Mwega et al 1990).Despite the world implementation of financial sector programmers in the developing world, banking sectors in many developing countries are still characterized by persistently high interest rate spreads. The question that deserves attention however is whether financial sector reforms had significant effect on interest rate spread in the country. In recent years, interest rate spreads have become of paramount importance to both investors and borrowers in making their respective decisions. This has an importance implication for the growth and development of the economy, because there is a significant link between the efficiency of financial sector intermediation and economic growth (ndungu 1997). The research hypothesis of the study among others was to test whether there is no direct relationship between financial sector reforms and interest rate spreads. The study employed various measurement methods to generate field data i.e. survey (interview) and observations. Findings from the study indicate that financial sector reforms have not managed to address the questions of high interest rate spreads in the country as financial institutions particularly commercial banks continue to enjoy high interest rate on their various lending products. Our results, therefore, suggest that while certain macro and policy variables are important determinants of interest rate spreads (IRS), other factors related to operational efficiency and profitability of individual financial institutions should be considered too.
Available in print form,East Africana Collection ,Dr.Wilbert Chagula Library,Class mark ( THS EAF HG1623.T34K34)
Financial institutions, Interest rates, Tanzania
Kailwa M .P (2007)The Impact Of Financial Sector Reforms On Interest Rate Spreads In Tanzania,Master Dissertation,University of Dar es Salaam,Dar es Salaam