BoT: Financial sector remains stable

TANZANIA: THE risks to financial stability were moderate on account of a positive economic outlook, reinforced by a stable macroeconomic and business environment.

According to the Bank of Tanzania (BoT) Monetary Policy Report for January this year, the banking sector which is the largest part of the financial sector, was liquid, profitable and adequately capitalised despite facing a scarcity of foreign currency.

During the period under review, deposits, assets, and loans increased. The increase in assets was in tandem with deposits, attributable to the expansion of the agent banking model and the increase of financial products and digital banking services.

The expansion of loans was attributable to the improved business environment. Liquidity in banks was adequate and enough for loan provision, with the ratio of liquid assets to demand liabilities and total assets hovering above the regulatory requirements.

The asset quality continued to improve, with nonperforming loans declining to 4.3 per cent in December 2023 from 5.2 per cent in September 2023, below the desired level of 5 per cent.

The level of non-performing loans (NPLs) is expected to continue declining as banks continue implementing measures to improve the quality of assets. Furthermore, the stress testing indicated the banking sector to be resilient to baseline, adverse and severe shocks across all major risk factors.

According to statistics from Statista, the banking market in Tanzania is expected to see a significant increase in net interest income, reaching 6.7 billion US dollars this year.

Also, traditional banks are projected to dominate this market segment, with a projected market volume of 6.7 billion US dollars in the same year.

Tanzania’s banking sector is experiencing a shift towards mobile banking, with an increasing number of people using digital platforms for financial transactions. Looking ahead, Statista report said the net interest income is expected to exhibit an annual growth rate (Compound annual growth rate 2024-2028) of 5.07 per cent, leading to a market volume of 8.2 billion US dollars by 2028.

When compared globally, in the United States is anticipated to generate the highest net interest income, amounting to 877.4 billion US dollars this year. Furthermore, the Statista report on the banking sector shows that the online banking penetration in Tanzania is forecast to amount to 4.41 per cent this year.

The credit card penetration in Tanzania on the other hand is projected to amount to 0.27 per cent this year. The bank account penetration is forecast to amount to 64.65 per cent the same year.

The debit card penetration in Tanzania is forecast to amount to 13.28 per cent this year.

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