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THE BANK OF TANZANIA
The bank of Tanzania is the government financial institution established in order to control financial services with the whole country and to operate as the bank of all banks. Sometimes it is called the central bank of Tanzania.
Functions of the central bank of Tanzania are as follows;
- Domestic monitory management.
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This includes financing the government budget deficit to control money circulation to advise the government on financial matters and control money inflation.
- External monitory management
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This includes controlling export and importing trade to control foreign exchange rates and to promote foreign investment in the country
- To provide loans
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To the other banks and to supervise the operation of the non banks financial institutions
- To formulate and supervise
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The implementation of financial policies in the country.
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To issue [make] the national currency ;Inform of coins and notes
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The contribution of the central bank of Tanzania in the economic development
- By controlling the import and export trade it helps to maintain the flexible balance of payment of the country.
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Balance of payment
Is the amount of money which a country earns through export trade. Usually the balance of payments of a country in terms of foreign currency and kept in special accounts called EPA.
EPA (External Payment Accounts)
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Is a bank account which is usually provides the followings
- It provides loans to the commercial bank such as NMB, NBC, CRDB and ACB which in turn used by the commercial bank to provide loans to their customers.
- It provides employment to the people either directly or indirectly therefore BOT which in turn used by the commercial bank to provide loans to their customers.
- It stabilizes the economy of the country by controlling money circulation money inflation and foreign exchange rates.
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It provides financial assistance to the government when there is a budget deficit so that to enable the government to meet its expected expenditure.
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COMMERCIAL BANK
Commercial banks are those banks which are established to provide banking services on commercial bases [to earn profit]
The main sources of profit in commercial banks obtain through interest rates which are charged from the loans provided to the customers. Apart from the commercial banks the rest types of banks are commercial too
The contribution of commercial banks to the economic development include
- They provide loans to investors of which they use to promote development of economic sector like agriculture industries mining and trade
- They provide technical advice to the investors so as to enable them to operate their business in profitable means
- They are used as custodian of keeping valuable items like diamonds
- They accept deposits from customers and promote formation of capital because if you deposit in fixed accounts it pays a fixed interest rate for a certain period.
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NON BANK S FINANCIAL INSTITUTION
These are financial institutions which do not provide banking services but they are responsible to mobilize saving life insurance, insurance against risks, old age insurance and offering specific credits.
The non bank institutions mobilize savings from their customers through having special agreements between customers and their employers e.g. NSSF mobilize saving from customers which are made through reduction from their salaries
The following are the types of non bank financial institutions which co-operate in Tanzania
- Insurance company
- Social security institutions
- Co-operative
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The general votes of the non banks financial institutions include
- To invest in physical investments such as construction of building for business e.g. PPF house , IPS house and other buildings for renting
- Provide specific credit or loans to small scale entrepreneurs for example small scale traders and SACCOS
- Provide employment to the people
- To provide social security inform of insurances
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The insurance companies
These are non bank financial institutions which provide social security’s to the people [customers] against various risks e.g. insurance against road accidents, insurance against fire and insurance against theft.
There are many insurance companies in Tanzania most of them were established after the reproduction of privatization policy in 1991 the most famous insurance company is the nation insurance company [NI] that was established in the 1960s.
The following are the functions of the insurance companies
- To provide compensation against various risks such as fire, car accidents and theft. This service can help the customers to rejuvenate their businesses when they face damage
- To invest in productive sectors such as buildings and to enhance social welfare of the people
- To provide employment to the people so as helping them to have reliable source of income
- To collect contributions from the customers or clients under special agreements
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SOCIAL SECURITY INSTITUTION
These are non bank institutions which mainly provide and promote welfare services to the people in the communities. They provide social welfare services under special agreement between the institutions and the customers or members
There are many social security organizations which belong to the government of private owners e.g. the national social security fund NSSF the parastal pension fund [PPF] local prudent fund [LPF]
functions of the social security organizations are as follows
- To mobilize savings from companies and members and paying them to the retired workers /even before if there is a genuine reason
- To provide specific loans and other social benefits to the members
- To establish physical investment such as construction of residential houses for renting to the customers
- To provide employment to the people so as to enable them have reliable source of income
- To provide education loan to the members (e.g. PSPF)
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CO-OPERATIVE SOCIETIES
There are many co-operative societies in Tanzania which belong to the private entrepreneurs or government institutions.
Examples;
FINCA TANZANIA
PRIDE TANZANIA
FUNCTIONS OF CO-OPERATIVE SOCIETIES
- To provide small scale loans to the people with low income and who do not have valuable items to act as securities of big loans
- To promote informed sectors of the economy by providing loans to small groups of people based on the members themselves that each member in a group is the security to another member
- To assist the community to reduce poverty by encouraging people to start small scale businesses i.e. food vendors
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To provide technical advice to the people on how to use small scale loans in profitable ways
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THE ROLES OF THE GOVERNMENT IN DEVELOPMENT
Government can be defined as institution formed by the people in a certain country in order to provide leader ship services, to promote economic and social development and to protect the interests of the people.
Therefore in any country the government performs the following roles:
- To make and implement different economic policies which will be used to promote economic activities such as agricultural activities, industrial activities trade, tourism and transport and communication. Therefore the government through different ministries make and implement economic policy in Oder to promote development in a given sector
- To make and regulate the international policy so as to promote and improve foreign trade. Foreign trade is the main source of foreign currency also foreign trade maintains the equilibrium balance of payment of a country.equilibrium balance of payment is the amount of foreign currency which a government earns through export trade
- To make implement and protect laws of the state by using the organ of the central government and the local authorities this can help the country to maintain peace and order
- To promote implement and protect human rights by providing freedom to the people morally ,socially, economically and politically this can help all the people to participate in political social and economic activities in the country
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To control political activity throughout the country in order to maintain political stability, political tolerance and democracy in the country.
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THE ROLE OF PRIVATE SECTOR IN ECONOMIC DEVELOPMENT
A private sector is that category of the country’s production activities that are not owned and controlled by the government
There are two major components of private sectors
- The formal sector
- Informal sector
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[1]. Formal sector
Formal sector is that section of the private sector that follows the strict rules and regulations laid down by the government in undertaking their activities. For example people who run private schools, health centers, hotels and hostels. In Tanzania formal private sector is dominated by the following activities.
– Industries
– Large scale agriculture
– Trade
– Transport and communication
– Commercial social service and health security
IMPORTANCE OF PRIVATE FORMAL SECTOR IN ECONOMIC DEVELOPMENT
In private formal sector there are companies such as IPP, AGIP, Private bus services (e.g. Hood, Happy Nation, Sumry, Raha leo, Mohammed Trans), and private health and hospitals (e.g. Aga Khan, TMJ, Regency, Tumaini) contributes to the economic development because of the following reasons.
(i). It produces goods and services that are enjoyed by the public for example transportation, hospital service etc.
(ii). It produces employment to many Tanzanians hence increasing the knowledge.
(iii). It provides technology among Tanzanians people
(iv). It facilitates the marketing process to our produced good
(v). Accumulation of government income through taxes, example the Tanzanian breweries and cigarettes companies and AZAM hence increasing the national income.
(vi). Provides support to victims of disasters example epidemic diseases, orphans etc.
[2]. Informal sector
Informal sector is that section of the private sector that is somehow free from strict rules laid down by the government for undertaking their activities. For example Petty businessmen/ women, food vendors, local technician such as carpenters, mason, tailors.
IMPORTANCE OF THE IN-FORMAL PRIVATE SECTOR IN ECONOMIC DEVELOPMENT.
(i). It provides employment to most Tanzanians especially to non-government employees like masonry, carpentry, and cookery.
(ii). This sector helps to improve local skills and knowledge of making different furniture like table, chairs.
(iii). It also helps to rescue peoples health problems using herbalists and traditional healers
(iv). Member of this sector are good and buyers of goods.
PROBLEMS FACING THE IN-FORMAL SECTOR IN TANZANIA
– Some of financial giving institutions in this sector lack viable loans and credits to assists its members in promotion of economic activities
– Most of members in this informal sector are poor and ignorant on how to improve their economic activities
– There is poor infrastructure in many places.
– Some members of this sector lack modern tools and knowledge for production
– Sometimes the environment where members of this informal private sector for example Food vendors, street carwash, and repair is done anywhere in towns like Dar es Salaam.
WAYS TO IMPROVE INFORMAL PRIVATE SECTOR
– Education with regards to skills and on relevant activities of a given group
– Good transportation network
– Tools and equipment to enable them to improve their economic activities
– Soft loans to help them undertake their business in a reasonable manner
SOCIAL DEVELOPMENT AND SOCIAL ACTIVITIES
As already explained under the types of development. Social development simply means; Improvement in the welfare of the people that include provision of social services like education, health, transportation, water, and power supply.
Development refers to the improvement of quality of all people in a given nation
Different social services provided in Tanzania.
– Education services
– Hospital services
– Water supply
– Energy supply
– Transport etc.