Reflection on some aspects of the commercial banking sector in post-Arusha Tanzania: 1967-1975

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University of Dar es Salaam
The period from end of WW II has seen an increasing concern among social scientists in the problems confronting least developed parts of the world. The field of money and finance has been no exception. Growing interest has been expressed in the study of monetary and financial arrangements within the overall context of underdevelopment. Writers of monetary and banking systems of less developed countries appear to have developed two themes with regard to monetary independence. There has been the tendency to equate the mere act of setting up central banks- side by side with a whole range of expatriate banks- side by side with a whole range of expatriate banks and at times with limited number of indigenous commercial banks- with independent monetary systems. In this case there is no due regard of the effectiveness of the control by the monetary authority ever the foreign banks. An extension of this argument could include also the nationalization of the expatriate banks which tend to be more domestically- oriented in their operations. The argument implies that the nationalization of the banks will have to be followed by a tendency to minimize the propensity to invest in foreign assets by the monetary and other financial institutions. But even them, this will leave unanswered the question of the nature of the socio-economic and political environment in which the would-be independent monetary and banking set-up would operate. There would them be an in-built bias of divorcing the workings of monetary and financial institutions from socio-economic and political contexts. It is for this reason that another line of thinking has gain prominence. According to this other view, both the creation of central monetary authorities and the nationalization of the expatriate banks are considered as necessary steps, though by no means sufficient conditions, to the establishment of monetary independence. But to be effective, it would also depend on further measures undertaken to suit some of the basic socio-economic and political features to the newly created monetary and banking institutions. The first of the above views is rejected on the grounds that it represents a weak criterion of looking at monetary independence in the underdeveloped economic in particular, it misses the point that the majority of the expatriate banks were, and still are, subsidiaries of the big multinational banks located in the metropolitan centres. So that even when the central bank is empowered with legal control over the foreign bank is empowered with legal control over the foreign banks, the control is rendered illusionary due to the economic position of these banks which continue to have access to financial support from the parent banks. Any attempts to open up national banks plus other financial institutions have produced only modest results. These have failed to withhold pressure from the foreign banks. Similarly, the other expression that the establishment of a publically owned monetary and financial system constitutes total monetary independence is unacceptable. One has to go deeper into the nature of the economic systems which have remained dependent on the foreign sector as manifested dependence on external markets for their incomes and their consumption and capital goods. To this should be added the over-reliance on external finance in the development process. Under these conditions the workings of the monetary system will tend to be dictated by the preponderance of the external factors on the domestic economy Aim and outline of study Both in terms of ownership and control, Tanzania can presently claim to possess a national monetary and financial system with the bank of Tanzania at the apex of the system, the national bank of commerce (NBC) as the only commercial bank together with some other public financial intermediaries. If we adopt the thesis that monetary and financial systems cannot be looked upon independently of the socio-economic and political spheres, the immediate question arises as to how these institutions have been functioning in Tanzania. The object of this study will be to look more closely at the activities of the NBC since 1967 when the Arusha Declaration was proclaimed. It will feature on two out of the major activities of the Bank Namely, the mobilization of domestic savings and the way the bank has channeled them into various sectors. The analysis will have as its underlying assumption that in spite of the attempts made so far to minimize the degree of dependency on the external world; Tanzania has remained, and is still, essentially a dependent country in economic terms. The central objective of investigation will them be to show how the neo-colonial pattern of the Tanzania economy has continued to dictate aspects of the Bank’s operations in the fields of domestics resource mobilization and credit disbursement. In what follows we shall examine very briefly the historical setting of the banking institutions in Tanzania. The studies will them potray the development of the banking system up to 1975. The evolution of the Bank’s deposits and its lending operations will precede the concluding remarks of the analysis.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF HG3399.T3W3)
Banks and banking, Commerce, Tanzania
Wagao, Jumanne H. (1976) Reflection on some aspects of the commercial banking sector in post-Arusha Tanzania: 1967-1975, Master dissertation, University of Dar es Salaam