Role of Commercial Banks in Poverty Aleviation in Tanzania

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According to the World Bank reports about 1.1 billion people live in extreme poverty for less than US$ 1. The extreme poverty being in the developing countries of which 9% are from East Asia and the Pacific and 41% are from Sub-Saharan Africa. Tanzania remains one of the 10 poorest countries in the world. Poverty remains widespread and deep, with half of Tanzanians living under conditions of deprivation, concentrated in the rural areas.

Commercial Banks contribute to economic growth through their financial intermediation role. Banking sector in Tanzania has experienced fundamental changes over the last decade following banks and other financial institutions reforms starting from the early 1990s.
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The policy aims at enabling low-income earners to access financial banking services.

The Banking and Financial institutions Act of 1991 vested powers for licensing, supervision and regulation of banks and financial institution in the hands of B.O.T. These powers are father consolidated under the 1995 B.O.T. Act. Hence, B.O.T is responsible for regulation and controlling commercial banks. The legal and regulatory framework has been extended to cover finance activities.

Despite the recognition of the dynamic role of credit to small enterprises, few business owners and the poor in rural Tanzania have access to, and benefit from, the available financial services


Lack of sufficient fund is one of the major factor that hinders many Tanzanians from participating in economic activities effectively and efficiently. The introduction of commercial banks is seen as the best alternative source of financial services for low income earners in rural areas as a means to raise their income, hence reducing their poverty level. Despite institutionalization of financial sector and banks by the Government, there has been less progress in promoting projects through the utilization of financial bank and credit facilities.

Thus the preliminary intention of this study examines the role of loan offered by commercial

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