COMERCIAL banks extended over 26tri/- credit to the private sector in the period ending December last year, which is 23 per cent increase compared to 12tri/- offered in the corresponding period in 2021, thanks to supportive monetary policy conditions.
The monetary policy measures implemented by the Central Bank have made the banking sector performance satisfactory as it remained liquid, capitalised, and profitable. Likewise, deposits and assets are increasing and asset quality is improving.
It is in this regard that the banking sector has continued to provide the needed boost to the private sector despite the unfavourable global circumstances brought by high inflation, the war in Ukraine and Covid-19.
The Bank of Tanzania (BoT) monthly economic report for January attributes the high private sector lending to improved economic activity and the impact of monetary and fiscal policies executed to limit adverse spillover effects of the global supply shocks.
Agriculture credit maintained the highest growth rate, partly responding to monetary policy measures implemented to support cost-effective credit intermediation for agriculture and agri-business activities.
The government move to create friendly business environment to attract and increase lending to agriculture has helped smallholder farmers become reliable and bankable to access credit from commercial lenders.
Formerly, banks viewed farmers as unreliable borrowers because of unstable income, lack of savings and volatile productivity that is dependent on rainfall.
During the reference period, credit extended to the agriculture sector that employs over 70 per cent of the country’s workforce increased by 46.1 per cent compared to a negative 7.7 per cent registered in the same period in 2021.
The other sectors that attracted a substantial amount of credit are personal activities, mainly small and medium-sized undertakings, which continued to account for the largest share of the total outstanding credit to the private sector at 28.8 per cent compared to 18.5 per cent in the preceding year.
Commercial banks’ lending to manufacturing activities grew by 28.3 per cent in the reference period compared to 12.4 per cent.
The BoT report shows that credit extended to mining and quarrying activities grew by 21.5 per cent compared to 10.4 per cent in the corresponding period in 2021.
The amount of credit extended by commercial banks to trade activities rose by 24.6 per cent in the reference period compared to 19.7 per cent recorded in the corresponding period in 2021.
The central bank monthly report shows further that credit extended to building and construction activities rose by 20.3 per cent in the period under review compared to negative 6.9 per cent in the corresponding period.
The credit extended to transport and communication activities increased by 14.5 per cent compared to the negative 7.8 per cent registered in the corresponding period in 2021.
The growth of private sector credit remained strong, with an annual rate of 22.5 per cent in December last year, reflecting the ongoing recovery of economic activities from the effects of the Covid-19 pandemic, complemented by supportive monetary and fiscal policies.
