Banking booms, but Vision 2050 needs more

ONCE upon a time in a parched valley, a strange scene unfolded. A single cow stood glistening, plump and proud, her coat shining in the afternoon sun. Around her, the rest of the herd grazed desperately on dry grass, their ribs showing, their heads low.

Villagers often wondered: How could one cow grow so fat while the others starved on the same land? This is the story of Sub-Saharan Africa, a story of Tanzania’s economy today.

The region with majority financially excluded population is the one leading the globe on banking profitability! The paradox was recently alluded to by private sector spokesperson during the launch of Vision 2050.

At the heart of this paradox is the banking sector, a splendid performer. Profits are soaring, non-performing loans (NPLs) are falling and cost-to-income ratios are tightly managed like prized dairy cows. In fact, Tanzania’s banks have reported impressive returns, with double-digit growth in profitability over the last few years. The financial statements are a portrait of stability and efficiency.

Across Sub-Saharan Africa (SSA), the script is largely the same. Regional banks have mastered the art of survival, thriving in uncertainty, guided by prudential regulations and technological modernisation.

Banking sector first-half results for 2025 attest to the story as Bank of Tanzania (BoT) Economic Bulletins showing a good momentum for doubledigit credit growth to private sector.

Sustainability of this growth and economic benefit will largely depend on the use of this credit. Recent report by BoT on household allocation of bigger chunk (60+ per cent) of personal loans to non-incomegenerating activities paints a gloomy picture on sustainability.

Typical reason for credit cycles causing economic booms and bursts, when credit floods to non-GDP-producing sectors as German Economist Professor Richard Werner regular warns. Yet, step outside the polished marble floors of bank headquarters and the picture is different.

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The broader economy, particularly the Small and Medium Enterprises (SMEs), informal sectors and infrastructure projects, tells a story of constraints and hunger.

Access to affordable longterm capital remains a dream. Growing firms struggle to secure financing that matches the speed and scale of their ambition. Young entrepreneurs with scalable ideas are often dismissed as “too risky.” Where are the adequately capitalised Development Finance Institutions (DFIs) to step in?

Their presence, once strong and mission-driven, has dwindled in recent years, leaving a funding vacuum. Without DFIs to bridge the market gaps, the herd of economic actors remains thirsty. Commercial banks, by design, are risk-averse. Their regulatory leashes: Capital adequacy ratios, liquidity thresholds, loan classification rules, are meant to ensure safety, not bold risktaking.

They must prioritise low Non-Performing Loans (NPLs) to satisfy shareholders and regulators. So, while they fatten up on transactional services, government securities and highyielding but safe retail lending, they cannot feed the starving sectors.

Sectors requiring patient, long-term risk capital. Sectors employing greater majority, powering the engine of economic growth. This is where the capital markets must now rise: Not as an alternative, but as a complement. The country’s capital markets, if creatively unleashed, can become the irrigation system that brings water to the wider valley.

The key lies in shifting the mindset from “trading markets” to “financing markets.” This means encouraging the listing of fast-growing SMEs on junior boards with lighter requirements–the DSE’s enterprise growth market segment, introducing blended finance vehicles and incentivising private equity and venture capital participation in early-stage enterprises.

More than that, it means using the stock exchange not just as a price discovery platform, but as a pipeline for long-term financing of strategic sectors: Energy, housing, agro-processing, logistics, digital infrastructure, extractive sectors and regional trade corridors.

With pension funds sitting on massive assets under management, there is room to deepen capital market instruments – green bonds, infrastructure papers, sukuks, diaspora bonds, all aligned with Vision 2050 targets. But these instruments must be well-structured, transparently governed and backed by projects with clear economic and social returns.

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Moreover, Tanzania must build its own generation of “developmental capital market actors.” These include domestic investment banks, brokerage firms with structuring capabilities, rating agencies with local insight and research institutions that can model future cash flows of projects, sectors and businesses.

These actors can do what traditional banks cannot: Package risk in creative ways, aggregate small capital into large investments and distribute returns over long durations. The future of Vision 2050 will not be financed through bank loans alone. It requires layered capital: Patient, ambitious, inclusive. A farmer cannot rely on a single cow to feed the village.

The whole herd must be nurtured. Let us take a lesson from the fattened cow: rather than envy her condition or blame the starving herd, let’s fix the pasture. Let’s irrigate the land with deeper, inclusive capital markets.

Let’s bring back adequately capitalised DFIs–whether through local innovations or partnerships and give them modern, digital teeth.

And above all, let’s have policy coherence that links monetary stability, fiscal discipline and market-driven financing. Only then will the rest of the herd rise, strong and healthy, to walk beside the fat cow, not behind her. Tanzania’s Vision 2050 deserves no less.