Trade credit surges as lending broadens

DAR ES SALAAM: CREDIT to the trade sector grew 60 per cent year-on-year to June this year, the strongest increase among major economic activities, as commercial bank lending expanded across commerce, transport, agriculture and construction.

The latest Bank of Tanzania Monthly Economic Review shows trade credit growth accelerating from 21.3 per cent in June last year, pointing to stronger demand for working capital, inventory financing, distribution and business expansion.

The acceleration in trade lending came alongside broader growth in private-sector credit, with several key sectors recording double-digit increases during the period.

According to the report, credit to transport and communication followed with annual growth of 46 per cent in June, up from 26 per cent a year earlier, reflecting stronger financing activity in logistics, connectivity and related services.

Agricultural lending increased 40 per cent, compared with 30 per cent a year earlier, highlighting rising financing flows into a sector central to production, employment and export earnings. Credit for personal activities also strengthened, rising 34 per cent from 14 per cent a year earlier, while lending to building and construction grew 30 per cent from 26 per cent.

The figures point to a broadening flow of bank financing across the economy, with commerce, logistics and agriculture among the fastestgrowing recipients. The trend suggests that banks are increasingly directing credit towards activities linked to trade, movement of goods, agricultural production and construction, supporting businesses’ working-capital and investment needs.

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Mining and quarrying credit expanded 22 per cent in the year to June, slightly above the 21 per cent recorded a year earlier.

The increase indicates relatively stable demand for financing in the mining sector, although its pace remained below that of trade, transport and communication, agriculture and personal activities. Hotels and restaurants, however, recorded slower credit growth of 8.3 per cent, compared with 22.5 per cent a year earlier, pointing to weaker expansion in bank financing to the hospitality sector.

Manufacturing remained the weakest performer among the selected sectors. Credit to the sector grew just 0.9 per cent after contracting 2.5 per cent in June last year, indicating comparatively subdued demand for bank financing.

The divergence across sectors shows that the expansion of private-sector credit is not uniform, with banks allocating more financing to sectors where demand for working capital and business activity appears stronger.

For businesses, the increase in trade and relatedsector lending could improve access to financing for inventories, distribution networks, transport operations and other activities supporting the movement of goods and services.