Monetary policy continues to slash lending rates: BoT

Dar es Salaam. Lending rates continued to decline in 2018 in response to a monetary policy being implemented by the Bank of Tanzania (BoT).

In its last month’s economic review, the central bank put the overall lending rate at an average of 16.72 per cent in the year to December 31, 2018, down from 18.62 per cent in December 2017.

“The decrease is partly in response to accommodative monetary policy,” noted the BoT report.

That also happened as the regulator took some measures to improve credit information of borrowers using a credit reference database and setting of benchmark interest rate based on the monetary policy framework for stability.

Banks also shifted to personal loans, which accounted for the largest pie of commercial banks’ total credit to economic activities.

In December 2018, personal loans, which are usually for financing small-scale business undertakings, grew by 47 per cent.

“Trade, manufacturing and personal loan-related activities used for small and medium financing remained the main beneficiaries of credit extended by banks,” noted the report. The activities were followed by mining and quarrying, and transport and communication activities

The overall time deposit rate decreased to an average of 7.50 per cent in December 2018 from 9.62 per cent in December 2017.

Tanzania is home to 56 banks but the majority of them are concentrated in urban areas. The banking industry’s profit fell to Sh208.92 billion in 2017 from Sh438 billion in 2015 and Sh423 billion in 2016.

The industry has also shed labour as the situation worsened. Between 2016 and 2017 at least 500 employers lost jobs.