BoT: Bank loans to transport and agriculture fall

Tuesday October 24 2017

Outgoing Bank of Tanzania (BoT) governor Benno

Outgoing Bank of Tanzania (BoT) governor Benno Ndulu displays a Sh10,000 bank note as he explains a point at a meeting. A BoT report shows credit to the private sector has slowed. PHOTO | FILE 

By Alawi Masare @AMasare

Dar es Salaam. Transport and communication; and agriculture are the most hit sectors as bank credit to major economic activities slows.

Credit to the private sector grew just by one per cent in the year ending July 2017 compared to 15.2 per cent recorded in the same period in 2016, but the two economic activities had negative growth.

According to the Bank of Tanzania (BoT)’s latest monthly economic review, loans to the transport and communication sector shrank by 25.9 per cent after shrinking by 22.1 per cent in the same period last year.

On the other hand, agriculture also experienced shrinkage of -9.4 per cent compared to -0.2 per cent.

“Credit slowdown to the private sector reflects a cautious stance taken by most of the banks in extending credit, following weakening of the banks’ asset quality coupled with slower growth of deposit liabilities and portfolio diversification in favour of low risk assets such as government securities,” stated the August report, which was published recently.

Transport was one of the booming sectors in Tanzania, but local and global economic changes that affected the flow of cargo, hence hitting the sector.

Bankers say their institutions have become cautious about the transport sector as most of the non-performing loans (NPLs) they battle with currently come from it.

“We are all aware of the reports that cargo through Tanzania’s main port of Dar es Salaam dropped and as a result, transporters experienced slow trading activities with some of them defaulting,” said a seasoned banker, who refused to be named in the newspaper.

“Majority of the current NPLs comes from the transport portfolio and banks now fear low trading activities. Lenders are also forecasting the future of transport especially trucks as the government invests in railways,” the banker noted.

A combination of these issues explains why local banks are reluctant to provide loans to the transport and communication sector.

Most of the bank loans went to trade that accounted for 21 per cent followed by personal loans that held 19.7 per cent in the year ended July 2017.

Manufacturing accounted for 11.2 per cent of all loans, while 5.8 per cent went to the transport and communication sector.