Credit growth to private sector drops

Despite the fall of lending rate, commercial banks credit to the private sector or major economic activities has slowed down largely due to net banking system claims on central government.

The monthly economic review from the Bank of Tanzania (BoT) for the the year ended September, this year, shows that an annual growth of credit to the private sector nosedived by 15.2 per cent during the month under review, compared to 16.1 per cent during the similar period in 2012.

The overall lending rate decreased to 15.33 per cent from 15.83 per cent, while the one-year lending rate also declined to 13.3 per cent from 14.35 per cent. Agriculture sector that employs more than 70 per cent of the population was among the least beneficiaries of credit extended by commercial banks to various economic activities.

Increased investment in agriculture could have greater impact in job creation and poverty alleviation. Commercial banks credit to agriculture decline to 1.3 per cent in the month in question compared to 8.4 per cent extended in the same period last year and 4.6 per cent of the preceding month.

Tanzania is one of the giant producers in the region of key traditional cash crops for export earnings which however, recorded a decline in value in September, this year, by 8 per cent to 818.2 million US dollars due to fall in unit prices and volumes for sisal, cashew nut, tobacco and cloves. The fall in export unit prices was consistent with movements of commodity prices in the world market.

Similarly, credit to the building and construction sectors recorded decline to 19.5 per cent compared to 46.8 per cent of the previous year and 41.8 of the month before.

According to the report, the decline in credit to some major economic activities was not inline with the growth of broad money supply to 13.9 per cent compared to 9.5 per cent recorded in the corresponding period in 2012. 

The increase was mainly explained by the rise in net government borrowing from the banking system, which offset the decline in Banks’ Net Foreign Assets (NFA)
Source: Daily News, reported by Sebastian Mrindoko from Dar es Salaam, Tanzania
Share on Google Plus

About Abduel Elinaza

This is a short description in the author block about the author. You edit it by entering text in the "Biographical Info" field in the user admin panel.