Interest rates on loans fall slightly

INTEREST rates charged on loans by banks remained broadly unchanged, with the overall lending rate averaging 16.07 per cent in October last year same as in the preceding month, but lower than 16.65 per cent in the corresponding month in 2021.

According to the Bank of Tanzania (BoT), monthly economic review for November last year the rate charged on loans extended to prime customers averaged 14.33 per cent, up from 13.92 per cent and 13.65 per cent.

Interest rates offered on deposits decreased slightly, with the overall deposit rate averaging 7.32 per cent, compared with 7.62 per cent recorded in September last year and 6.29 per cent in October 2021.

The deposit rate offered to prime customers, herein referred to as the negotiated deposit rate, slightly eased to 9.52 per cent from 9.67 per cent and 9.71 per cent in the preceding month and the corresponding period in 2021, respectively.

During the reference period, the growth of credit extended by the banking system to the private sector and the central government remained high on account of the sustained high growth of credit to the private sector.

Annual growth of 34.2 per cent was recorded in October 2022, higher than 9 per cent in the corresponding period in 2021.

Private sector credit recorded a year-on-year growth of 23.7 per cent, compared with 5.6 per cent in October 2021 and the target of 10.7 per cent for 2022/23.

Private sector credit performance is attributed to the normalisation of economic activities from the Covid-19 pandemic, coupled with supportive monetary policy conditions.

During the year ending October last year, all major economic activities recorded positive growth of credit, except hotels and restaurants.

The Outstanding credit to hotels and restaurants shrunk by 4.5 per cent following the writing-off of non-performing loans to comply with regulatory requirements.

The agriculture credit maintained the highest growth rate, partly responding to monetary policy measures implemented to support cost-effective credit intermediation for agriculture and agri-business activities.

Meanwhile, personal activities mainly small and medium-sized undertakings, continued to account for the largest share of the total outstanding credit to the private sector, at 38.4 per cent, followed by trade, manufacturing and agriculture activities.