Private credit growth slows across key sectors

DAR ES SALAAM: PRIVATE-SECTOR credit growth slowed in May as lending momentum weakened across several key sectors of the economy, reflecting a cautious banking environment despite continued resilience in trade, agriculture and transport activities.

The latest Bank of Tanzania Monthly Economic Review indicates that commercial banks continued supporting businesses through lending, but financing growth moderated in industries that are critical for investment, industrial production, tourism and employment creation.

The trend highlights a changing credit landscape where banks are balancing the need to support economic expansion with concerns over borrower risk and loan performance.

The slowdown in privatesector lending carries important implications for businesses seeking expansion capital, particularly manufacturers, tourism operators and firms dependent on long-term investment financing. While credit remains available, the data suggest that access is becoming increasingly selective, with lenders favouring sectors demonstrating stronger performance and lower risk profiles.

Manufacturing experienced the most significant decline, with annual credit growth contracting by 3.3 per cent in May compared with a 7.3 per cent expansion recorded during the same period last year.

Although lending to manufacturers showed signs of recovery earlier in the first quarter, the return to negative growth points to weaker demand for industrial financing and increased caution among banks.

For manufacturers, slower credit growth could affect investment decisions, including expansion plans, equipment upgrades and increased production capacity.

The sector remains a major driver of economic transformation, making access to affordable financing essential for improving competitiveness and supporting industrial development. The hotels and restaurants sector also faced financing challenges, with credit declining by 2.9 per cent compared with strong annual growth of 21.7 per cent in May last year.

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The contraction comes despite continued improvement in tourism performance and rising visitor numbers, suggesting that some businesses in the hospitality industry are still facing difficulties accessing expansion and operational financing.

However, other sectors continued attracting significant bank lending. Trade remained one of the strongest recipients of private-sector credit, recording annual growth of 35 per cent in May.

Although this was lower than the 50 per cent growth recorded in January, the sector continues to benefit from strong commercial activity and demand for working capital. Transport and communication continued to lead major borrowing sectors, recording annual credit growth of 44.6 per cent.

The sector’s strong performance reflects continued investment in logistics, connectivity and related services that support movement of goods, people and information across the economy. Agriculture also maintained strong access to financing, with annual credit growth reaching 30.9 per cent, slightly higher than the 29.8 per cent recorded in the same period last year.

Continued lending to farming, agribusiness and agricultural trade has supported one of Tanzania’s most important economic sectors and strengthened value-chain development.

Meanwhile, credit growth to building and construction slowed to 25.4 per cent from 27.9 per cent a year earlier, while mining and quarrying recorded growth of 19.8 per cent, down from 22.9 per cent. Although both sectors continued receiving financing, the slower pace suggests a more measured lending approach by banks.