Interest rates on loans decline slightly

THE interest rates charged on loans by banks declined marginally in June this year with the overall lending rate averaging 16.22 per cent compared with 16.25 per cent registered in the preceding month and 16.69 per cent recorded in June last year.
According to the Bank of Tanzania (BoT) monthly economic review for July, the negotiated lending rate charged to prime customers averaged 14.25 per cent compared with 14.40 per cent and 13.98 per cent recorded in the preceding month and June last year, respectively.
The interest rates offered by banks on deposits increased slightly in June this year compared to the preceding month.
The overall deposit rate averaged 6.80 per cent compared with 6.69 per cent and 7.05 per cent recorded in the preceding month and in the corresponding period last year, respectively.
Meanwhile, the negotiated deposits rate averaged 9.43 per cent compared with 9.63 per cent and 9.37 per cent.
It is from this backdrop that private sector credit during the period registered highest growth after rising to 19.4 per cent compared with 15 per cent in the preceding month and 3.6 per cent in June last year.
The strong growth was largely attributable to improved business conditions and ongoing recovery of private sector activities, coupled with supportive fiscal and monetary policy conditions.
Economic activities that exhibited strong growth of credit from banks were agriculture, mining, micro, small and medium undertakings, trade and manufacturing.
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 per cent in the year ending June this year compared with 9.8 per cent 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.