Five Year National Development Plan, and the National Strategy for Growth and Reduction of Poverty II. Initiatives to empower the population to participate in the management of public resources have been designed and some are being implemented. 592. The CSAR also spells out areas of best practice specific to public finance management. These are: using participatory mechanisms to improve planning processes, e.g. the budget process, public expenditure review and the public expenditure and financial accountability review; strengthening institutions and processes to fight corruption and money laundering; and round-the-clock monitoring of the soundness of the financial sector. 593. The Zanzibar CSAR specifies the reforms and initiatives implemented since 2003 to improve policy and planning instruments and improve coordination in public finance management. They include: strengthening aid coordination and external resource management; improving accounting, control, reporting and auditing procedures; enhancing the domestic revenue base; developing human resources; civil service reforms; strengthening debt management; improving budgeting and expenditure frameworks through the MTEF process; and fiscal decentralisation. 594. The Zanzibar CSAR also lists the outcomes of the various reforms to date. Several remaining challenges are identified. They include: the inadequacy of financial services; lack of modeling capacity for forecasting revenues and expenditures; lack of capacity to properly use the MTEF mechanism; uncoordinated fiscal decentralisation efforts; and lack of an Internal Auditor in Zanzibar. II.Findings of the CRM 595. The CRM observed that Tanzania is well equipped with good policies and financial sector reform initiatives aimed at enhancing public finance management. It is noted that the sector has undergone substantial changes since 1991. This led to significant improvements in the financial landscape. The number of banks stood at 42 as at end of December 2010 (consisting of 28 commercial banks and 14 non-bank financial institutions), up from three in 1994; ownership structure of the banking sector also changed (with five institutions that had majority state ownership and 37 were majority privately owned); ownership in terms of foreign and local is at 50-50 per cent; forex bureaus were 180; the number of Savings and Credit Cooperative Societies and Village Banks, as well as membership thereof substantially grown since 2005; the first deposit-taking microfinance institution was registered; the network of banking institutions increased with the bank branch network (branches and agencies) standing at 473 in 2010, compared to 430 in 2009; banking services were provided through a network of 995 ATMs and 1,304 Point-of-Sale devices; and, insurance companies increased from two in 1996 to 25 in 2011 (Bank of Tanzania, Annual Report 2010). 596. Further available data shows that banking, pension funds, the insurance sector and other financial intermediaries account for 75 per cent, 21 per cent, 2 per cent and 2 per cent, respectively, of total financial sector assets, However, bank branch networks are still concentrated in the major cities of Dar es Salaam, Mwanza, and Arusha. 597. This concentration in the main cities means shallow financial system penetration and a correspondingly limited access to financial services to support economic growth for the majority of the population, especially small-scale and medium-sized businesses. This finding confirms the 2010 Economic Survey statement: “despite the growth in financial assets, the financial system depth remains small and access to finance is limited for both urban and rural population. …..the proportion of adult population who use banks and other formal financial institutions was only 12.4 per cent in 2009”.97 Stakeholders, especially in the regions outside the major cities, stated that despite the visible expansion of banking sector institutions and products, effective access remained a major challenge due to high inflation and interest rates, and collateral requirements. For example: CPI inflation (annual averages) consistently increased from 4.5 per cent in 2002 to 12.1 per cent in 2009; lending rates remained around 15 per cent for the period 2002 to 2009; and, deposit rates were below three per cent for the same period. In addition, because of a tightening of prudential requirements by the Bank of Tanzania, commercial bank lending conditions were onerous. 598. Banking and Financial Institutions (Microfinance) Regulations were promulgated in 2005 in order to open up the field for deposit-taking by microfinance institutions. However, only one such institution had started 97 The Economic Survey 2010, Ministry of Finance, United Republic of Tanzania, 2011. 126