Private sector credit sees slower growth

DAR ES SALAAM: PRIVATE sector credit growth has slowed to 17.6 per cent for the period ending June this year, down from the 20.8 per cent recorded during the corresponding period last year.

The Bank of Tanzania (BoT) said in its latest monthly economic review that the recorded growth aligns with the private sector’s demand for financing to support economic and investment activities.

“Despite the slower pace compared to last year, the BoT noted that the credit expansion reflects sustained lending in key sectors such as agriculture, manufacturing and trade, all of which are crucial for driving the country’s economic growth,” stated the report.

BoT remains optimistic that credit to the private sector will continue to grow steadily in the coming months, supported by ongoing monetary policy adjustments aimed at fostering a conducive lending environment.

Credit growth plays a critical role in driving economic development, particularly in a country like Tanzania, where various sectors, including agriculture, manufacturing and trade, rely heavily on access to finance.

The expansion of credit, especially to the private sector, is vital for supporting business growth, enhancing productivity and fostering overall economic stability.

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Meanwhile, personal loans, predominantly directed towards small and medium enterprises (SMEs) represented the largest portion of private sector credit at 36.7 per cent.

Other activities that accounted for a relatively large share of credit included trade, at 13 per cent and agriculture at 11.8 per cent. The Monetary Policy Committee (MPC), at its meeting in July, this year maintained the Central Bank Rate (CBR) at 6 per cent for the quarter ending September.

In line with this, the Bank is implementing monetary policy to ensure the 7-day BoT Monthly Economic Review August interbank rate evolves within the band of +/- 200 basis points of the CBR. As in the past period since the inception of the interest rate-based monetary policy framework, monetary policy operations continued to maintain adequate level of liquidity in the economy in July 2024.

Accordingly, the 7-day interbank interest rate evolved within the target band, averaging 7.55 per cent.

The extended broad money supply grew by 10.1 per cent, consistent with the growth rate observed in the previous month and in line with the current monetary policy stance.