Agriculture lending grows by 42 per cent

Lending to agriculture grew by 42.1 per cent in the year ending July compared to negative 10.7 per cent in the corresponding period last year, thanks to government efforts that have made the sector attractive to commercial lenders.

Tanzania’s agriculture sector that contributes significantly to the economy and food security is also the major source of employment to over 70 per cent of the country’s workforce.

The Agriculture Minister Hussein Bashe said recently that limited access to finance was an impediment to farmers in adopting better technologies to improve efficiency in production.

Hence, he noted, in order to enhance access to formal financial services to the majority of Tanzanians, a need for a total reform for banking regulation is vital.

The government efforts to create friendly environment saw NMB and CRDB banks slashing the interest rates to agriculture to 9 per cent, thus contributing significantly to the increase of funding to the sector.

Lowering the lending rate to agriculture is viewed as a fundamental step in supporting the government’s grand plan to commercialise the sector and propel its contribution to economic growth.

The sector contributes about 26 per cent to the Gross Domestic Product (GDP), 60 per cent to raw materials and 25 per cent of foreign currency.

According to the Bank of Tanzania (BoT) monthly economic review for July this year, the other economic activities that exhibited strong growth of credit from banks were mining, micro, small and medium undertakings, trade and manufacturing.

The strong growth was largely attributable to improved business conditions and on-going recovery of private sector activities, coupled with supportive fiscal and monetary policy conditions.

During the period under review, private sector credit recorded the highest growth in the past five years, reaching 19.4 percent,compared with 15 percent in the preceding month and 3.6 percent in June last year.

Meanwhile, personal loans continued to account for the largest share of outstanding stock of private sector credit, followed by trade, manufacturing, and agriculture activities.

Domestic credit extended to the private sector and central government by the banking system grew by 20.7 percent in the year ending June compared with 9.8 percent in June last year.

Monetary policy implementation in June 2022 faced challenges of rising inflationary pressures, emanating mainly from global shocks and supply side factors.

Notwithstanding, money supply continued to grow,albeit at a slow pace, partly attributable to scaling down of accommodative monetary policy measures in the last quarter of 2021/22.

This was done in order to reduce second round effects of general increase in prices, while safeguarding ongoing recovery of economic activities.

Specifically, extended broadmoney supply grew at an annual rate of 6.5percent compared with 11.7 percent recorded in June last year.

This development translates to an annual average growth of extended broad money supply of 12.2percent, broadly in line with the target of 10 percent in 2021/22.

Similarly, broad money supply grew by7.7 percent, compared with 10.5 percent.

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