Personal loans dominate bank credit

DAR ES SALAAM: PERSONAL loans remained the largest component of bank credit in the year ending August accounting for 34.1 per cent of lending to selected economic activities, as private-sector credit continued to expand, highlighting sustained demand for financing among households and businesses.

The latest Bank of Tanzania’s (BoT) Monthly Economic Review shows that credit to the private sector grew by 33 per cent annually to 55.23tri/- in August, up from 41.53tri/- recorded during the corresponding period last year.

Trade accounted for the second-largest share of credit at 15.8 per cent, followed by agriculture at 13.8 per cent, reflecting the importance of commercial and agricultural activities in banks’ lending portfolios.

Manufacturing accounted for 7.4 per cent of credit, while transport and communication represented 6.0 per cent.

Other services accounted for 4.8 per cent, according to the Bank’s breakdown of credit allocation. Despite retaining the largest share, personal loans recorded annual growth of 24.9 per cent in August, below the overall private-sector credit growth rate of 33 per cent.

Meanwhile, credit to trade grew by 47.1 per cent annually, while agriculture recorded growth of 38.4 per cent, indicating increased financing directed towards these activities.

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Transport and communication recorded annual credit growth of 77.2 per cent, followed by mining and quarrying at 75.9 per cent. Credit to building and construction grew by 41.8 per cent, while manufacturing recorded more moderate growth of 12.9 per cent.

The figures indicate that credit expansion was uneven across economic activities, with some sectors recording considerably faster growth than others.

The review further shows that the overall lending rate eased slightly to 15.05 per cent in August from 15.10 per cent in July, potentially offering some relief to borrowers seeking financing for business expansion and investment.

Credit allocation is an important indicator of how banks distribute financial resources across the economy. Increased lending to productive sectors can help businesses expand operations, improve production capacity and create employment opportunities.

However, the largest share of credit does not necessarily mean that an activity receives the fastest-growing financing. Personal loans, for example, continued to dominate the distribution, while several other sectors recorded stronger annual credit growth.