THE Bank of Tanzania crackdown targeting forex shops that were operating illegally in the country few years ago has opened unique opportunities for banks thus contributing to their incomes.
Few months after the crackdown, the BoT reported increased more business and collection of foreign currencies by commercial banks than it was before. The Bank plays a crucial role in fostering development of financial markets in Tanzania by providing enabling environment.
Specifically, the Bank provides financial market infrastructure, putting in place appropriate legislations and overseeing and designing of market instruments.
The closure of foreign exchange shops that operated illegally has created an opportunity for banks to capitalise by opening windows for the service and generate income.
In an exclusive interview with the Daily News yesterday in Dar es Salaam over the weekend, Mkombozi Bank Plc, Managing Director, Mr Respige Kimati said the government move to uproot unlawful forex shops is commendable and has created stability of the foreign exchange business in the country.
“Before taking this bold decision, speculation and hoarding made by some forex dealers made the business uncompetitive and created some instability,” he said.
He noted further that with the government move, the Tanzanian shilling has improved after having a good system to monitor and control foreign exchange and the Tanzanian shilling trading.
He said if the country does not have control over foreign exchange markets, people may be buying foreign currency without any intention to make foreign transactions to import goods and services.
“If you have no control over the foreign exchange market people may be buying foreign currency but not making foreign transactions, that they are importing goods and services. It may be that they were taking money out of the country which is bad to economy,” he added.
He said in the past when there were many bureau de change shops operating in the country for the banking sector it was not a big business due to unfair competition created by some forex shops that operated unlawfully.
“The rates for buying and selling were completely different from what they were giving to the bank. There may have been speculation and that is why the government intervened,” he noted.
“I think maybe they were getting their dollar to suppliers in a way that wasn’t very fair or maybe they weren’t paying taxes or certain things or there was another way it was helping them earn money at a lower rate and they were able to sell at a lower price and make a profit,” said Kimati.
With this decision, the government is able to monitor and control foreign exchange trading because every dollar transaction must have a backup of what is going to do in the economy activity.
Mr Kimati said to a large extent the bureau de change plays a huge roll of stabilising currency or setting the value for money according to high demand.
“To a large extent the bureau de change plays a roll stabilising currency the value of money depending on the demand and supply of such foreign currency,” said Kimati.
He said in the local market there may be demand for dollars but there are no economic activities that are not beneficial to the nation. He added that the dollar trading should support economic activities.
He also said that there was a positive view of foreign exchange coming out without supporting economic activities, which is why there has been instability in the exchange for a long time.
“Through this government mechanism the currency trading has been stable for a long time although it is high. So it was important that foreign exchange trading did not come out without supporting an economic activity, that is why there has been stability in the exchange for a very long time,” said added.