Published by Tawajud Lwenduru.
In Tanzania, the Bank of Tanzania is entrusted with the responsibility to monitor Private Sector External Debt (PSED) data including utilizing information on private sector external borrowing available in commercial banks.
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 within 14 days of the loan being approved, whereby the Bank should be presented with all necessary information 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/her 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 BoT to be availed with an executed copy of the loan agreement and the loan agreement should contain the following requisite clauses:
a) Name of the lender and borrower;
b) Contact details such as postal address, fax number, telephone number and physical address of the lender and borrower;
c) Loan amount and applicable currency for the transaction;
d) Purpose of the loan;
e) The applicable interest rate;
f) Loan maturity period;
g) Loan repayment schedule with clearly indicated principal repayment, interest payment, dates, payment schedule can be on monthly, quarterly, semi-annual, or annually;
h) Clauses on events of defaults and consequences thereof;
i) A clause indicating applicable law;
j) Company’s seal affixed on the loan document;
k) Attestation by a notary public and commissioner for oaths;
l) The party responsible for paying withholding tax.
In addition to the loan agreement, a potential borrower is required to produce a short-form letter to its commercial bank formally instructing them to commence registration of the loan with BoT. A copy of this letter will also need to be submitted to BoT along with the rest of the documentation cited above.
Without a Debt Registration Number (DRN), you will not be able to remit the money back to the lender and hence the importance of such registration. This arrangement was introduced by the BoT to monitor the loans that are coming into the country, and to ensure that the loans can be smoothly remitted back to the lender. The Bank may institute penalties to entities for non-compliance.