Credit to Tanzania private sector grows over the last year

Thursday June 13 2019

Finance and Planning Minister, Dr Phillip

Finance and Planning Minister, Dr Phillip Mpango. Photo |Edwin Mjwahuzi 

By The Citizen Reporter @TheCitizenTZ news@tz.nationmedia.com

Dodoma. The Finance and Planning Minister, Dr Phillip Mpango, said here on Thursday, June 13, that Tanzania’s economic growth outlook remains bullish, thanks to an improvement in commercial banks’ credit to the productive sector.

Presenting a statement of the state of the national economy in Parliament, Finance and Planning Minister, Dr Phillip Mpango, said the government – through the Bank of Tanzania (BoT) – took several measures during the past months with a view to stimulating liquidity in commercial banks to spur growth of credit to the productive sector.

The measures, he said, have had a positive impact on the operations of commercial banks and the economy at large.

The measures include a reduction in commercial banks’ minimum reserve ratio and a reduction in discount rates.

In March 2017, the BoT cut the minimum reserve ratio required of commercial lenders to eight per cent from 10 per cent in a move to reduce costs of borrowing and stimulate economic growth.

In August 2017, the BoT also revised downwards its discount rate from 12 to nine per cent before lowering it further to seven per cent in August 27, 2018.

The move was meant to lower commercial banks’ lending rates for the benefit of the final consumer.

Some of the notable outcomes of such measures, according to Dr Mpango, include a growth in credit, extended by commercial banks to the private sector.

The credit growth was recorded at 0.8 per cent during the year ending April 2018 but it reached 10.6 per cent during the year ending April 2019.

“The increase in the rate of credit growth to the private sector was largely on account of the various initiatives that the government was taking to improve the business environment; a sound management of the monetary policy,” he said, noting that the measures have also helped to bring down the levels of Non-Performing Loans (NPLs).

Attractive sectors

However, personal loans remain the highest recipient of commercial banks’ loans, accounting for 28.8 per cent of total loans extended, Dr Mpango said.

Trading activities came second, with an 18.5 per cent share of credit extended by commercial banks to the private sector while the manufacturing sector came third, taking up 11.3 per cent.

Liquidity

According to Dr Mpango, the liquidity in the economy was good last year, with broad money in circulation (M3) increasing by 4.9 per cent to reach Sh25.6 trillion as of April 2019, from Sh24.4 trillion as of April 2018.

The increase was largely on account of the adoption of electronic money transfer services which have significantly reduced the need for one to travel with hard money.