Private sector credit grows by 22 per cent

PRIVATE sector credit grew by 22.5 per cent in the year ending February compared with 11.9 per cent in the corresponding period last year.

The Bank of Tanzania (BoT)’s monthly economic review for March said the outturn was attributable to supportive monetary policies ongoing recovery of the private sector from the Covid-19 pandemic effects and improved business environment.

According to the report, credit to the agricultural sector continued to register the highest growth, attributable to the introduction of a special loan facility by the Central Bank into banks for on-lending to the private sector, particularly agricultural activities.

In a bid to help the economy recover from the effects of Covid-19 in 2021, the Central Bank took policy measures to promote credit to the private sector and lower interest rates.

In this initiative, the BoT introduced a special loan amounting to 1.0tri/- to banks and other financial institutions for on-lending to the private sector.

The BoT shall provide a special loan to banks and other financial institutions at 3 per cent per annum for pre-financing or re-financing of new loans to the private sector.

A bank wishing to access the special loan facility shall be required to charge an interest rate not exceeding 10 per cent per annum on a loan extended to the private sector.

The BoT monthly report for March shows that credit extended to the agriculture sector grew by 41.8 per cent compared to 2.2 per cent offered in the corresponding period.

However, it is slightly low compared to 47.4 per cent disbursed to the sector in January.

The credit extended to the manufacturing sector during the reference period grew by 20.5 per cent down from 28.6 per cent offered in the preceding month.

The BoT reports shows also that transport and communication sector credit grew by 16.8 per cent during March compared to 7.0 per cent extended in January.

Loans granted to personal (micro, small and medium enterprises) grew by 22.7 per cent compared to 22.4 per cent in the previous month.

Credit offered to Trade activities grew by 23.1 per cent in the reference period compared to 20.5 per cent in the preceding month.

Meanwhile, in terms of share to total outstanding credit, personal loans continued to dominate, followed by trade, manufacturing and agriculture.

The central bank sustained the implementation of a moderate liquidity-reducing monetary policy stance, which aims at striking a balance between controlling inflation and supporting the ongoing recovery of economic activities.

As a result, the money supply recorded annual growth of 11.5 per cent in February this year lower than 17 per cent in February last year.

Despite the slowdown, the rate was within the growth target of 10.3 per cent for 2022/23. The growth of the money supply was supported by private sector credit expansion.

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