Private sector credit up on rising demand for loans

CREDIT extended to the private sector grew by 22.5 per cent in the year ending April this year compared with 13.4 per cent in the corresponding period last year on increased demand for loans.

The Bank of Tanzania’s Monthly economic review for May shows that the increase reflects the recovery of demand for new loans by the private sector, attributable to an improved business environment, recovery of global supply chains, supportive monetary and fiscal policies, coupled with the lagged impact of policy reforms pursued by the Bank in support of agriculture sector.

The growth of credit to the agriculture sector remained the highest, growing at 36.1 per cent, partly attributable to credit extended under the 1tri/- special loan facility and Statutory Minimum Reserve requirement (SMR) relief to banks that provide loan to agricultural activities at the rate below 10 per cent.

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According to the report, the growth of credit to the private sector is also attributable to ongoing government measures to improve productivity in agriculture and agri-business.

Meanwhile, loans extended to personal undertakings, mainly for small and medium enterprises continued to be the main driver of credit growth, followed by trade, agriculture, and manufacturing activities.

In terms of shares, personal loans accounted for a significant portion of the total credit, followed by trade and manufacturing activities.

The BoT report states further that the conduct of monetary policy in April this year remained cautious in managing the supply of the shilling liquidity in the economy to strike a balance between taming inflationary pressures emanating from global shocks and supporting economic growth.

The monetary conditions, complemented by supportive fiscal policy, bolstered the growth of credit to the private sector, leading to an annual expansion of the extended broad money supply of 17.2 per cent, compared with 10 per cent in the corresponding period last year.

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