Private sector credit growth surges 18 per cent

DAR ES SALAAM: CREDIT to the private sector accelerated to an annual growth rate of 18.1 per cent in the period ending November last year, up from 15.3 per cent in the corresponding period of 2024, pointing to a sustained expansion in lending activity and improved credit uptake across the economy.

The latest Bank of Tanzania Monthly Economic Review shows that credit expansion during the period under review outpaced the previous month’s growth of 16.1 per cent, pointing to a continued acceleration in lending momentum and strengthening credit conditions in the economy.

“Credit uptake was strongest in the mining, trade and agriculture sectors, underscoring a lending pattern aligned with productive and trade-related activities that are central to economic growth,” the BoT report stated.

The faster growth in private sector credit suggests improved access to financing for businesses and households, which can support higher investment, working capital expansion and consumer spending, key drivers of economic growth.

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Credit growth was most pronounced in the mining sector at 30.1 per cent, reflecting heightened financing for extractive activities, while trade and agriculture followed with growth rates of 29.4 per cent and 27.0 per cent, respectively signalling a credit allocation pattern that favours production, commodity-linked sectors and supply-chain activity with broad spillover effects on the economy.

This sectoral distribution of credit growth suggests a strategic reorientation of lending toward activities with strong export potential and backward linkages, which can enhance foreign exchange earnings, support value chains and stimulate employment.

However, the concentration of rapid credit expansion in commodity-related sectors also underscores the need for effective risk management to mitigate exposure to price volatility and external shocks.

During the period under review, personal loans predominantly supporting micro, small and medium-sized enterprises remained the largest component of private sector credit at 35.8 per cent, highlighting the continued reliance of MSMEs on householdlinked financing, followed by trade at 13.6 per cent and agriculture at 13.0 per cent.

This concentration of credit toward MSMEs, trade, and agriculture is economically significant as it supports employment generation, stimulates local production and strengthens value chains, thereby fostering inclusive growth and enhancing the resilience of the broader economy.

According to the Bank’s report, the sustained expansion of credit to the private sector drove extended broad money supply growth to 23.0 per cent during the period under review, up from 21.4 per cent in the preceding month and 13.6 per cent in November 2024, highlighting a sharp acceleration in liquidity creation within the economy.

This rapid expansion in money supply reflects strengthening financial intermediation and increased economic activity, but it also carries implications for macroeconomic management, particularly in terms of inflationary pressures and the calibration of monetary policy to ensure that liquidity growth remains consistent with price stability and sustainable economic growth.

The surge in broad money supply further underscores the growing depth of the financial sector, indicating that banks are increasingly channeling funds into productive sectors of the economy.

However, sustained monitoring is essential to ensure that the pace of credit and liquidity growth aligns with the economy’s absorptive capacity, preventing overheating while supporting investment, consumption and long-term economic resilience.