Tanzania: deposit, lending rates gap narrows down

The spread between one-year deposit and lending rates has narrowed down leading to a relief to lenders and depositors as both are benefiting on the declining and increasing of the rates.

The deposits rate increment, according to economists, will entice people to save more while open doors for lenders to borrow more for investment purpose.

The Bank of Tanzania (BoT) Monthly Economic Review of February shows that overall time deposit rate rose by 24 basis points to an average of 8.98 per cent in January 2015 from the preceding month.

“…The spread between oneyear deposit and lending rates narrowed to 3.07 percentage points from 3.80 percentage points in December 2014,” the report said.

One-year deposits rate increased to an average of 10.76 per cent, from 10.66 per cent in the preceding month, while one year lending rate decreased by 62 basis points to 13.83 percent.

On the contrary, lending rates broadly declined, with the overall lending rate decreasing to an average of 15.37 percent from 15.42 percent in December 2014.

Zan Securities Chief Executive Officer, Raphael Masumbuko said the banks have increased deposits rate to attract more deposits while at the same time lowering lending rate to woo borrowers.

“This has two sides one people have opted to keep their money into a safer way instead of put them under the pillow… while banks want people to borrow more,” Mr Masumbuko said over a phone. The CEO said also the new culture of saving money through mobile phones fuel the increase rate of deposits in banks vaults.

BoT report shows that in January, liquidity in the financial markets improved relatively from the preceding month, which was consistent with end of seasonal demand for cash for payments of corporate income tax and end of year festivities.

“As a result, interest rates decreased across the markets, namely: Treasury bills, repos and inter-bank cash markets,” BoT said in the monthly economic review report. However, despite decline depositors shy away from putting their monies in banks after the sub-sector growth slow down by 0.5percentage points and expands by 20.1 per cent to 5.66trio/- in January.

On other hand, banks’ credit extended to all major economic activities experienced higher annual growth in January compared the growth recorded in last January, with exception of agriculture.

“Credit to transport and communication activity recorded the highest growth of 31.7 per cent…” BoT said.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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