The encouragement of the Government of Tanzania to the private sector participation of economic activity through the external borrowing has significantly increased the private sector external debt, through this awake by the government to stimulate the growth in the private sector, there is an increase of borrowers, borrowing from the international banks and offshore financial institutions willing to lend money to Tanzanian corporate entities.
The Bank of Tanzania (BoT) as a regulator has a great role to ensure the private sector external borrowing is carefully monitored to ensure that the economy has the capacity to honour its debt obligations and to put in place prudent measures such as a good database on private sector external debt amongst others. The Bank of Tanzania has always made sure that the information collected for the database is strictly used for statistical purposes and can only be published in aggregate form to preserve the privacy of individual borrowers.
The Bank of Tanzania through the Foreign Exchange Circular No. 6000/DEM/EX.REG/58 of 24th September 1998 mandatorily requires all foreign loans to be registered with the Bank of Tanzania and for a Debt Registration Number (DRN) to be obtained.
In order to register a foreign loan and obtain a Debt Registration Number (DRN) a borrower is supposed to contact with his commercial bank, the borrower’s commercial bank has the obligation to notify the Bank of Tanzania, to liaise and manage the registration process, it is paramount to note that during this process, it is mandatory for the Bank of Tanzania to be availed with a executed copy of the loan agreement and the loan agreement should contain the following requisite clauses:
- Name of the lender and borrower;
- Contact details such as postal address, fax number, telephone number and physical address of the lender and borrower;
- Loan amount and applicable currency for the transaction;
- Purpose of the loan;
- The applicable interest rate;
- Loan maturity period;
- Loan repayment schedule with clearly indicated principal repayment, interest payment, dates, payment schedule can be on monthly, quarterly, semi annual or annually;
- Clauses on events of defaults and consequences thereof;
- A clause indicating applicable law;
- Company’s seal affixed on the loan document;
- Attestation by a notary public and commissioner for oaths; and
- The party responsible for paying withholding tax.
Additional information related to the the loan agreement which can be updated periodically to the Bank of Tanzania includes:
- Disbursements indicating amount, disbursement date and currency;
- Debt service payments indicating principal and interest paid and value dates; Other charges paid such as commitment fee, management fees etc;
- Details on loan enhancements or cancellations; and
- Details on loan restructuring or refinancing.
It is imperative to note that the Bank of Tanzania does not charge any fees for obtaining the Debt Registration Number, and it is important that for any lender to include a Debt Registration Number as a condition precedent to the loan agreement to ensure that the borrower complies with the loan registration with the Bank of Tanzania immediately after the execution of the loan agreement.