CREDIT extended to agriculture has continued to record the highest growth, partly due to monetary policy measures rolled out recently to support cost-effective credit intermediation to the sector and its agri-business activities.
According to the Bank of Tanzania (BoT) monthly economic review for December last year, commercial banks’ lending to the agriculture sector grew by 54.1 per cent in the year to November compared to negative 12.4 per cent registered in the preceding year.
Despite this outstanding performance, the BoT report shows that credit extended to the agriculture sector was slightly down in this period under review compared to 57.7 per cent recorded in the year ending October.
To make sure agriculture remains the major driver of economic development, the government has prepared a national strategy whose implementation started in 2022 till 2030.
Agriculture contributed 26.1 per cent to the Gross Domestic Product (GDP) for the year 2021 and 61.5 per cent of employment in the same period. The sector, according to the ministry, provided 65 per cent of all industrial raw materials used in the country.
The agriculture sector meets 95 per cent of the country’s food requirements of which 8 per cent of the food produced comes from small-scale farmers, who rely on rainfall and have limited access to inputs and information that could help them improve yields.
In terms of share, personal related activities, trade, manufacturing and agriculture activities remained the major holders of the outstanding loans extended to the private sector by banks.
The private sector credit growth was strong at 22.6 per cent over a year-on-year basis, almost tripling from 7.8 per cent registered in November 2021.
This reflects improving economic activity and the impact of monetary and fiscal policies executed to limit adverse spillover effects of global supply shocks.
In the preceding month, Private sector credit recorded a year-on-year growth of 23.7 per cent, compared to 5.6 per cent in October 2021 and the target of 10.7 per cent for 2022/23.
Despite declining slightly by almost 1 per cent, the private sector credit performance has continued to be strong and is attributed to the normalisation of economic activities from the Covid-19 pandemic, coupled with supportive monetary policy conditions.
During the reference period, almost all the major economic activities recorded an increase in credit.
The BoT has said the growth of money supply and private sector credit continued to be satisfactory, thanks to the monetary policy implementation that is geared towards balancing between taming inflationary pressures and supporting economic activities.
The BoT’s monthly economic review for December shows that the policy drive was implemented by lessening monetary policy accommodation.
“The implementation of the monetary policy aimed at taming inflationary pressures and supporting economic activities have made the money supply and private sector credit growth become satisfactory,” the BoT report said.
During the period under review, the extended broad money supply grew by 12.7 per cent in line with the target of 10.3 per cent for 2022/23.
