Agriculture commands highest credit growth

TANZANIA: THE agriculture sector topped the list of sectors that attracted the highest credit growth on account of the improved business and investment environment in the country.

The latest Bank of Tanzania (BoT) monthly economic review report for January shows that credit extended to agriculture stood at 43.5 per cent compared to 38.9 per cent in the preceding period.

The strong credit growth to agriculture is attributed to a number of measures aimed at creating a friendly environment for the sector to be commercially viable for lenders to extend loans.

For example, one of the measures was for the BoT to reduce the statutory minimum reserve (SMR) amount equivalent to the loan extended by a bank that extends credit to the agriculture sector.

According to BoT, a bank is required to submit evidence of lending to agriculture at interest rate not exceeding 10 per cent per annum.

This move and other government measures contributed largely to increasing credit growth to agriculture sector.

Agriculture sector in the country employs about 70 per cent of the Tanzanian work force and accounts for almost 26 per cent of GDP.

The mining and quarrying followed after agriculture at 36.4 per cent in the period under review compared to 17.6 per cent in the previous period.

According to the BoT report, private sector credit growth remained strong, albeit declined reaching 17.1 per cent in December last year compared to 18.3 per cent registered in the preceding month and 22.5 per cent in the corresponding period in 2022.

However, the growth was above the projected target of 16.4 per cent by the end of December last year.

This performance reflects continued high demand for new loans consistent with the increase in economic activities, backed by improving business environment.

Personal loans continued to account for the largest share of outstanding credit at 37.2 per cent, followed by trade, at 13.6 per cent and agriculture, at 10.2 percent.

In the period ending December last year the extended broad money supply grew by 14.1 per cent, compared with 13.7 percent and 11.6 per cent in the year ending November last year and December 2022, respectively.

This was driven by sustained robust growth of credit to the private sector.

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