Private sector credit growth down 15pc

DAR ES SALAAM: PRIVATE sector credit growth slowed by 15.3 per cent in the period ending November last year, down from 18.3 per cent in the same period in 2023, likely due to the low level of liquidity in the banking sector.

The latest Bank of Tanzania (BoT) Monthly Economic Review for December highlighted that the agricultural sector experienced stronger credit demand compared to other sectors.

During the period under review, the agricultural sector saw a credit growth of 41.9 per cent, primarily directed towards crop purchases.

According to the BoT report, the agricultural sector was followed by personal loans, which largely constitute credit extended to small and medium enterprises (SMEs) and building and construction.

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In terms of share, personal loans continued to dominate, accounting for 38.7 per cent of total credit, followed by trade, agriculture and manufacturing. Moreover, during the period, BoT continued to implement monetary policy in November last year with the aim of ensuring the 7- day Interbank Cash Market (IBCM) rate remains within a corridor of +/-200 basis points of the Central Bank Rate (CBR), which was set at 6 per cent for the quarter ending December last year.

During the month, the 7-day IBCM rate averaged 8.29 per cent, below the 8.48 per cent recorded in the preceding month, but slightly above the CBR corridor. The outturn was due to a low level of liquidity in the banking sector, which, however, improved compared to the observed trend since midAugust last year.

The low level of liquidity was attributed to the high seasonal demand for cash to finance crop purchases, spurred by a bumper harvest. Following the improved liquidity among banks, the use of reverse repurchases agreements (reverse repos) declined to 257tri/- from 2.88tri/- traded in October last year.

The utilisation of the Lombard facility also decreased to 3.87tri/- from 5.60tri/- in October 2024.

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The extended broad money supply grew by 13.6 per cent, compared with 14.6 per cent in the preceding month and 13.7 per cent in November 2023. This growth was driven by foreign assets of the banking sector – corresponding to an increase in foreign currency liquidity.