Tanzania: Households’ disposable income up

Households' access to formal financing has increased with the ratio of debt to disposable income jumping to 69.8 per cent during the six months to September last year from 66 percent.

According to the Bank of Tanzania (BoT)’s Financial Stability Report, Tanzania faired favourably well compared to other countries including Namibia, Mauritius, South Africa and Israel.

Similarly, household debt servicing cost remained broadly unchanged during the first three quarters of the year 2015.

The ratio of household debt servicing cost to gross income rose to 19.4 percent in the third quarter from 19.1 per cent in the first quarter of 2015.

This is partly explained by relatively stable interest rates. Housing mortgage finance is one of the components of household debt that is rising rapidly on account of government effort to foster growth of housing industry in Tanzania.

Recent reduction of downpayment on mortgage loans from 20 per cent to 10 per cent is reflection of such efforts to encourage uptake of loans.

A strong real estate market drives economic activity while a weak market slows down economic activity thus threatening financial system stability.

This is due to close relationship between housing mortgages, real estate, bank lending and household financial conditions. Until September 2015 mortgage to household debt was 6.3 percent as proportion of total credit in the economy was 2.7 per cent.

The total outstanding mortgage jumped to 3.68tri/- compared with 1.35tri/-in the previous year. Also the period under review saw the mortgage volume rose to 4,487 units from 2,201 units, which has more than doubled.

The development is partly attributed to economic growth, growing population, urbanisation and increase in number of commercial banks offering mortgage loans product.

These developments indicate significant opportunity for real estate development in the country focusing on residential property sector for which there is a wide gap between.
Source: Daily News, reported from Dar es Salaam, Tanzania
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